Today, I am sending out modest rent increases to 4 tenants who have been with me for 3 years and have not had a rent increase yet. Today is the day I quit dragging my feet on this and just 'get it done'.

I know there are many LL here whose rents are 'under-market' and they would very much like to bring their tenants rent back up to market rent (the economy is good, so why not?). There is another group of LL's whose rents are at market (or above) and still need to raise rents to reflect changes in rising property taxes, insurance, and operating costs (I'm in this group).

My primary question here is this: why do most LL's (including myself) have a psychological hang-up about raising rents? Are we afraid (or paranoid) that if we raise rents, our good tenants will get upset and move out on us? Or do we just feel guilty about bringing in tons of rent money each month and we know our tenants are living on the edge and struggling to make ends meet?

If anyone here truly understands the human mind (psyche) and can explain why most LL's have a mental hang-up about raising rents, I would like to hear from you. Maybe you can help me feel less guilty about sending out rent increase notices today.

Nothing keeps a LL from sending out a notice of raising rent , but after the tenant complains and threatens to move, come back to the tenant saying "after further review of your rental file, we are able to keep your rent the same for another year"

David (MI)

This post has nothing to do with negotiations between LL and tenants. This post is all about human behavior and how LL's rationalize rent increases. Most of the local LL's that I know personally, have a deep-seated 'fear' of having a vacancy. Why is this?

Roy AL maybe call me crazy-- I raise rents to increase how much I make.

Opposed to David's statement -- basic negotiating-- NO negotiations-- take it or leave it. Highlighting LEAVE.

I've said it before-- if you don't raise rents constantly (yearly) this is what happens.

Our rents have gone up 150.00 this year. With new everything inside 250.00. This is on top of the yearly increases. Those who sat on their hands for 3 years not increasing are now faced with gee I need to get 400.00 more to catch up.

I just raised on 2 renters that have been with me 2 years. Funny story on that, one of the 2 paid rent May 31, but didn’t put in the new amount... (paid at bank) so I had to text her asking if she got the rent increase I sent 5 weeks ago. She did but assumed it was rent receipts and didn’t open it. I had to say please add the extra $20 before you get a late fee. I am now raising rents on everyone when they hit the 2 year mark and of course at move outs. I keep track of what similar places in the same side of town rent for, we do many many improvements while tenants are in our houses so I no longer feel bad to do $20 increase. This renter that didn’t open the letter we did a new front and back door and insulation. Plus when she moved in we had just built a new deck, put a new bathroom sink, new bathroom floor, new carpet in the bedrooms and we put a storage shed that she requested before moving in.

Roy, if you have a fear of a vacancy , nothing keeps you from avoiding that vacancy by rescinding a rent increase.

some tenants will not complain and accept the rent increase and stay.

some tenants will complain and you rescind the increase and they stay

some will leave either way and you will have a vacancy whether or not you increase the rent

Roy, you've already stated the answer: it's a psychological game a lot of times. "If I raise the rents, they might move!"

So what? Then go get a market rate tenant.

I would make a list of reasons why you fear raising rents and then list strategies to overcome them. Here's one for starters:

FEAR: "I don't want to raise rents because a tenant might move, creating a costly turn over."

SOLUTION(s):

1) Keep rent raises regular and modest (3% per year), unless the market rises sharply and can afford more. It is RARE a tenant will move if you are in line with market. Why move to avoid paying more only to pay the same somewhere else?

2) Make turnovers faster and less costly. Sub out as much work as possible to avoid losing time.

3) Make regular inspection of properties while occupied to reduce tenant damage and/or fix stuff that is damaged as it happens vs. waiting for a huge laundry list of repairs at move out.

4) Provide tenants clear instructions on how to clean and do basic maintenance (i.e. replace mini-blinds) which will result in them getting the max deposit back.

You've probably heard of WMH getting units back in rent-ready condition. I borrowed a page from her handbook (literally, I have her cleaning list!) and send that to my tenants now. I'm also a fan of automated showings (lock box). A typical turnover for me costs less than $300 in direct expenses and is 3 days or less. For these reasons, I DO NOT FEAR turn overs. In fact, I kind of like them: time to collect new pet fees!

SHELBY ia that's what i'm talkin about. You described how your letter was ignored. Can I tell you what we do on renewal's. We send out, 45 days prior to lease end, -- an offer: you can renew for 40.00 more-- initial and return selection to us. In the same offer is the I'm going month to month at 150.00 more-- if that's what you want don't renew.

Guess what--? when the selection is not returned it's automatic month to month and rather than asking for the 40.00 we advise them they have been placed on month to month at 150.00 since they did not return their selection.

WHY do I have to call them? Why do I have to track down the difference-- sign and select or it's automatic--.

If your property's and tenants are kept RENT READY it's a breeze to turn them. I am not a fan of auto showing. I do have my MMan trained to allow prospects to view the property while he's working-- but they must be in fairly good shape (rent ready X tenants help with that) My cleaning girl is trained to vacuum and touch up for walk thru immediately.

Sid,

Roy can i answer that question you posed to Sid?

Why-- because there mom and pop outfits. They want to brag how they own rentals to their friends and family. They want to be part of the those nasty tenant conversations and participate in latest gossip. Bottom line-- they're not in it for the bottom line.

Roy,

If you want answers from the people who don't raise their rents, I suggest talking to those LLs from across the street and ask them. Most of the folks here are more professional and do raise our rents.

To post such a question here is like the preacher asking the choir why people don't go to church.... ;-)

My GUESS is they are one or more of the following:

1) Lazy/Apathetic

2) Not paying attention due to other more pressing issues

3) Psychological games

4) Fear of confrontation

Sometimes I think, "It's only $25, I don't need the extra $25..." but yes I do. If only because I want to go out to lunch.

So to stop worrying about when to increase it is now in my newest leases. "Rent will only increase by $25 if a new lease is offered and signed prior to term expiration." I will change that amount when appropriate when offering a new tenant a lease. So I don't have to send a letter, it's in the lease they sign.

My rents are almost all $1000-$1250 or so, so $25 is only about 2-2.5%.

Myob,

I will add this reason. Because they don't operate their business using a p&l and balance sheet they don't understand their expenses, they can't see how desperately they need more income.

My reason has to do with the fact that as soon as I raise someone's rent they will:

a. become snotty when they speak to me

b. start coming up with stupid things they want changed like "I don't like the color of the kitchen, buy me paint etc."

c. start looking to move and possibly find something else and leave me with two months of no rent.

Ally some answers:

a. so what? I'm already snotty to them after lease signing!

b. color NO, buy me! NO. Learn to be good at NO. Practice.

c. when looking and no rent file court action right away-.now there's a record for their Credit report and new LL to see.

d. 300 cable, 400 eating out, vacations 1K, guess they'll be a belt tightening!

e. f. g. get outta my home the sooner the better.

My rent increases are very modest. I could get more for all of them and raise to market value at turnover.

I raise less for single people with no pets who take great care of the property and are easy to work with because those I don't want to lose.

From a psychological standpoint my brain works like this:

Do I need $20 a month more than my tenant does? No.

Being in the 32% tax bracket that $20 is worth $13.60 to me.

I sent out over 20 rent increases in April. It was a nice pay raise. I didn’t send out 4 because. One lives next door to me and they are the perfect tenant / neighbor, they are 200 under, but I still clear 600 a month on them, I don’t want to change neighbors. One I did not increase because about 4 yers ago I caused a sewer back up, and they were very helpful and understanding fir something I caused, they are 150 under, but I clear 950 a month on that one. The other two are on both sides of a crazy terrible neighbor that runs off a lot of my tenants. With calls to child protective services, animal control, code enforcement, the popo, etc. she is a terrible hateful old lady. Both of my tenants on each side of her are about 200 each under market. But I still

Sid, here is your answers...

1. You can't really control taxes, insurance cost. But if you raise rent too much and create a vacancy... You can control that. Vacancy is a huge expense. You can control how fast it gets re rented, how it is marketed....

2. The checks are coming, don't upset the apple cart. This is their thinking. Why be greedy and get another 25/month and they leave.

Tim IN, I don't know you except for some posts you've made but I have to disagree with what you wrote (in part).

Taxes can be controlled somewhat by following a good appeal process-- most owners don't do it #1 because it's hard and #2 it's hard and lastly they therefore don't try. Insurance can be lowered by either increasing your deductible or adjusting the cost basis.

Vacancies can be a hugh expense-- but the hugh part comes from not changing tenants often and not keeping a positive eye on your property's. We rotate our stock often - that translates into quicker turn times when empty. We don't hold properties. When they're done and ready we can hold 3 days maybe-- so the vacancy can be as little as 3 days.

The policy of "don't upset the apple cart" is just way wrong. Heck under that policy rents would still be at the 20 year mark.

You say you raise rents and at are market with them-- but then say I have no problem raising rents on older Residents in small increments? Again that just doesn't make sense?

I think some here would agree-- maybe not-- NOT having vacancies can and is a hugh expense long term.

Lisa FL said, "From a psychological standpoint my brain works like this:"

I love the above statement! It tells me how the gray matter between your ears rationalizes a rent increase or no rent increase. I wish everyone would answer this post in a similar fashion.

The short answer. Landlords don't raise rent out of FEAR.

Myob- I just say what others landlords think. Those are the answers to Roy questions, why don't other landlords in rease rent. They don't treat like a business. It's side income only. I agree with your comments...

My comments about raising rent... In the last year the market is up $100/mo or nearly 20% for the same unit. I rented at market rate last year, gave increase this year... But not the 100. Doing turnovers every year is what creates huge vacancy losses. Every 3-5 years is my happy medium. Compare to other landlords, I'm at the top for comparable units.

My brain works like this-

Up to a certain point, I'm willing to trade below market rent for an above average tenant. (One who doesn't complain, doesn't threaten codes or lawsuits, who pays rent on time etc.)

I'm willing to pay a premium (in opportunity cost) for a tenant like this if I have to.

But only up to a certain point...

5% percent below what I consider market rate? Sure.

6,7,8,9 percent below...maybe...

10% below... no.

Pencil it out. A tenant who takes good care of things and doesn't do any damage makes more for the landlord at a lower rent point, than a tenant who pays more but carelessly damages things, breaks things by using them too hard, wears out the house.

Rent raises should be on a tenant by tenant basis, and a comparative market study should be done to see what the tenant could get for the same rent if the tenant decides to move.

We have a very good tenant who always pays on time, never causes problems, no noise, very pleasant to deal with, and we do raise her rent, but only by 3-4% a year, because she is a social worker for the county, we know she doesn't make a lot of money and doesn't get big raises or bonuses.

OK, you want psychology? Here you go.

I believe it the good, old, familiar fear of the unknown that stops people from doing lots of things.

If a landlord doesn't know what the tenant's response will be, then they don't know what the near future will be: Will they pay the new amount? Will they complain? Will they move? Will they tear the place up on the way out? Will they become verbally(or worse) aggressive & threaten me with bodily harm because I am a mean nasty landlord who wants to steal money from the mouth f their children for no good reason?

If you are a professional, business-minded property manager who operates ethically, you should have procedures in place to eliminate the unknown - and therefore the fear of the unknown.

If they complain, I respond with (please check what other options are available for this price, plus cost of moving, new security, etc. If you decide to move, your written notice must be delivered by XX date)

If they don't pay new amount - they get notice to pay or vacate.

If they cause damage, it will be found during next inspection & billed immediately.

If they get threatening, they get notice of non-renewal or eviction.

If the landlord is in control, not the tenant - it takes away the fear.

Fear and laziness.

Fear the tenant will react negatively and or leave

Laziness that they will have to work to update apt and find new unknown tenants..

How to stay poor: fear and laziness.

We raise most of the rents every year, every turnover to market rent. We update most apts all the time and spend weeks finding new tenants and every year we make more money because the cost keeps going up and up and you have to raise rents to stay ahead and continue to make profits. Just plain business .

Janet [CA] you are correct. last year when the threat of rents control loomed i raised the rents 20% with a 60 day notice. i advised the tenant that if control failed the raises would be rescinded. it went down and the rents returned to their prior rate. the whiners are not through with us though and rent control is BACK. so accordingly so are my rent bumps. and so they will be yearly as of now.

I had tenants that I did not raise rent for six years because my thought was they might move so don't fix what isn't broke.

My other reason is that I don't really know what I am doing yet.

Roy,

For me it was

-lazy. I prefer to say “busy with bigger fish to fry”

-lazy. Was not watching the competition.

-no real system or how to that was easy. Too hard to mess with for a few bucks.

So, I put automatic renewal and increase in my lease.

At National Convention a few years ago my buddy J[IN] inspired me to have the courage to increase rents.

I use Jeffrey's system and added $3400 a month to my cash income.

I felt sooo duummbb for not having done this earlier.

For one res I calculated I had left $13,000 on the table over her occupancy by not raising rents on that ONE home!

BRAD

I myself do regular rent increases and all of my tenants have gotten used to the regular rent increases.

On a two-bedroom unit $50-$75 increase is pretty typical, our city in Portland, Oregon has become a tenant ran city , the city Council has adopted no rent increases over and above a designated amount, there is a set dollar amount that someone is able to raise the rent. But each and every year only once a year. Can you raise the rent.

I do take advantage of that, and everyone across the board gets the increases. One property that I have owned for 19 years with the very same tenant is significantly lower simply because earlier in my career I was not faced with roaring taxes from the County.

all of the folks that are in my properties understand that the reason for the increases are the reasons that they are , voting into place, that raise the property taxes therefore raise their rent's, and also one of the things is garbage, if I'm going to pay for the garbage to appease the city and make them happy, it's going to cost for me to do that.

keeping solid renters is almost as important as finding and qualifying solid renters.

On that cord, my city is attempting to force those with less than desirable on their past histories to be an equal to those who have absolutely clear past references.

Therefore my screening criteria, is now called a qualification and screening criteria!

Follow the leads of the professional management companies in your area. Call around check on the rents and you will see that even your model tenants are happy to pay and stay when you do them right and you take good care of them.

Just like Mr. landlord said 25 years ago, stay in control!

Whenever a seller would tell me they have the same tenant after many years, I think to myself that he or she just never raised the rent in as many years. In my town, we never hear anything about PROPERTY TAX CONTROL but there is a lot of talk about rent control and capping the rent. Whenever taxes go up or the local or federal government slaps another fee on the landowner, of course rents go up. Some people can't seem to see the connection.

I think LLs don't raise the rent because they fear the tenant is going to move out and don't want to deal with a vacancy or feedback/complaints from the tenant.

In reality, the tenants should be expecting an increase in rent on a regular basis, just like we've come to expect an increase in the cost of general living expenses.