This morning I scanned my rent rolls and made a short list of tenants who have been with me for at least 2 years and have not had a rent increase. I am trying to get the courage to send these tenants a modest 5% rent increase.

My question is this: why do many LL's (including myself) have a mental block about giving good tenants a rent increase?

Because why rock the boat?

In my mind Roy-- it's laziness! If you keep the status quo you just sit back and wait on the payment.

No new apps no fix up no THINKING.

Rotate tenants like stores rotate stock. Wash rinse repeat to make real money in this every month. Getting fresh tenants every few years is not the burden it's made out o be here.

NE,

I do the same as you (raise on the PITA's) but from an ethical business standpoint, that is not the correct way to base a rent increase.

MYOB,

Among all of your 60? properties,...do you rotate your tenant stock like a retail store does?

I would like to know more on how you do this? In the past, you have stated that you don't like long term tenants,...like after 5 years,...you want them out?

Build it in to your lease. Make the statement "rents normally increase by a small percentage every year to cover new expenses".

And leave it at that.

When the lease is 60 days from expiration, BASED ON MARKET CONDITIONS, send a notification of rent increase:

Rents are being increased by X percent. If you lock in a new year's lease within XX days, your new rent will be increased by only 1/2 that amount as a reward.

Fear or laziness say NE and myob.

Which one?

Who cares? Doesn't matter.

This is good timing, Roy. I've got 7 letters going in the mail today for rent raises. Also, I finally took the advice of my good friends Brad 20K and Sisco and changed my lease to auto-renew on a year-to-year WITH an automatic 2.9% rent bump. This eliminates both fear and the laziness. Rent raise happens automatically. It's what we agreed to up front, so all I need to do is send a "reminder" going forward.

"Dear Joe, thanks for being with us for a year. As you know we agreed to a COLA for this year, so your new rent is now $XXX. Thanks!" I'll send that via text: no need to waste stamp.

LL: "When you renew , there will be a $50 rent increase"

tenant: "that seems like a lot, we will have to see if we can afford it or move"

LL: "Let me see what I can do and get back to you"

a few days later ...

Sid,

Where did the 2.9% come from? Is 2.9% the same COLA percentage that the government uses each year for people receiving SS or some other form of government entitlements?

2.9% is where Brad and Sisco are. Sorry if it wasn't clear. Seems like a decent increase without being too nuts. If you want 4-5% today, go for it.

I look at local market. Some go up, some don’t. How much should your places be based on comps?

I’ve got one that Moved in during June 2016. Paid at the top of the market for the time and house. I can’t raise it, based on comps.

What I did do was get them on our PayDay rent plan last year, and sneak in an increase that way. :)

I know local LL's who are still getting the same rent ($350/month) that they quoted 20 years ago!!! And some of them are right next door to some of my rental properties.

Something happened to me yesterday that prompted me to make this rent increase post.

A very good 3 year female tenant called me and said she was giving me her 1 week notice to move on April 30th. I then asked her some probing questions on why she was moving and she said,..."I need more space than this small 2/1 house I rent from you", (she has been paying $625.00 for 3 years). When I asked her how much rent she was going to pay another LL for 'more space',...she answered $700.00. At this point, I felt like a real fool for not raising her rent in previous years.

How would you feel if this happened to you?

Roy I've explained here before how we do it-- no secrets from friends

I have a lease that says 12 months minimum. So dates are picked to suit the rent calendar. I have a rent calendar for the next 24 months. each month has about 7 slots where i place the street name of the property under the month when it will expire in the future.

Out of 12 month cal 3 months have no expirations June, November and December. The 6 or 7 expiration slots are mixed with 2 new renters, two 1st year and 2 seconds. Rent rates are adjusted depending on what year there in with us and the PITA principle mixed in. (in all these years I've only not renewed a tenant for the PITA maybe 3 times but think only 2 times. For example Mar had 7 rentals, april had 9 May we just sent out 7. June will be "0". July will have 6.

Ken....I can still ask for a higher rate or non-renew. "Auto-renew & 2.9% increase" is what happens if neither we nor the tenant give the required 30 days notice.

If my town increases 10%, I say, "10% bump or non-renew"....exactly the same process as if I had had to mail them a randomly chosen rent increase letter because I had no auto-increase.

They key I've found is to set up a 'floor' below which I don't fall. It's sort of like a stop-loss in stock trading.

David,

3 years ago, this tenant was paying $550.00 with her previous LL and told me that $625.00 was going to be a struggle for her but she would manage it somehow. And she did. I never increased her rent because I assumed she could not afford anything higher,...stupid me. Live and learn here.

Roy, there is a difference between being able to afford something and finding something to be a good value.

David,

Shelby,

We have a rent increase clause for taxes. (Thank you, Brad).

Mailed a new price and explained the reason.

Small increases every year are unlikely to make tenants move. If you wait 5 years and increase it all at once, then tenants start looking around to see what else is available.

I get the very most I can get when I fill a vacancy and rents are unlikely to have gone up so much in that first year that I can justify a rent increase.

I have a flat fee of $25 in my leases (along with an "auto-renew" for one year). Typically about 2 months/ 60+ days from expiration I look up what is available out in the market, compare them to what I have along with what I'd like to do/ want to do, MUST do to the apartment (not FIX things but upgrade, paint, etc) if they stay or leave, etc.

I then typically will offer about 2-3% increase on the rent. This is usually LESS than the $25 that is in the lease.

If they take it, great. If they move - that's fine too (if I don't want them to move then I may negotiate with them). IF they do move I typically will do what I want in the apartment after they move out and raise the rent more than what I offered as long as it's not out of whack. Sometimes I do just to see if someone will pay it - if not and I'm really ready to have someone in there - I'll drop it if I want/need to.

Last year I had two leave in the same building - I raised one $10 and the other I raised $15. Two years ago I had one leave and I repainted the entire apartment, put in new flooring and I raised the rent $25. I didn't increase them last year and this year I was increasing them $10. They decided to move because they wanted to purchase a house in the "near future". The moved out and I posted the rent at $15 higher (didn't do anything to the apartment except fix a leaky faucet that I noticed).

That's taken and another one is vacant but I'm hopeful that the other one that JUST came on is taken by the girl I showed it to today :) (I didn't increase the rent since it's pretty much at the market rate right now). In addition, I don't want to rock the boat in getting them too high. Overall, I've owned them for about 6 years and we're $235 higher (gross) per month. Not bad!

when I inquired last year? about automatic rent increases in the lease, the consensus was not to do it because you want flexibility in calculating the increase, or may not want to increase the rent.