Happy Holidays to all the Landlords out there! I ask myself this question every year...so I'm asking you too!

I own a 4plex, live in 1 unit and rent out the other 3. One tenant has been here for almost 16 years and for the first so many years I never raised rents and for the past 3, 4 years I've started raising rents annually, rent increase letters go out December 1, effective January 1; the rents in the area have been increasing tremendously along with taxes and water, etc.. etc. and I'm trying to bring the tenants up to speed because they are so far behind and I'm barely keeping my bottom line in the black.

How far below market are you?

Do they pay on time?

The answer is you need to be at or near market.

Tenant longevity is something many small time land lords strive for, and some big time ones too. But here's a little thought-of secret: not only are your RENTS behind the times, so are you UNITS!

What does that mean?

A 16-year tenant has done 16 years worth of wear and tear on the unit. When that person moves out, hardly anything will be damage. It will all be considered "normal wear and tear". Also, you'll probably have to remodel/spruce up to modern standard.

It is better, in my humble view, to rotate out tenant every 3-4 years. That way damages can be fixed and billed against the security deposit, and your rents will always stay at or near market.

The other nice thing about turn overs is fees. I collect an up front animal registration fee with each pet. Over 10 years time, I can collect 3-4 pet fees vs. 1 pet fee if I'm rotating tenants in an out.

Dingy old blinds they destroy get replaces by fresh, modern blinds, billed against the deposit.

Dirty, smudged paint gets refreshed by a fresh coat or at least a good touch up, billed against the deposit.

TERRY,

Don't be shy. Your expenses have gone way up over 16 years.

Studies by people smarter than me show that only a tiny percent of people will move due to rent increases.

We slipped up and did not increase rent on a few people for several years. We had to hit them with a large increase to keep up with our market. Some went up $150. They all stayed.

I have used 2.9% annually for years and it works well. Could be higher that past 1-2 years because my market has been hot.

We give them a chart to help them understand.

We include the SAVED column, not the I LOST column, that's for me.

2014 $650.00 +2.9% = 668.85 226.20 They saved, I lost

2015 $668.85 +2.9% = 688.25 459.00 They saved, I lost

2016 $688.25 +2.9% = 708.21 698.64 They saved, I lost

2017 $708.21 +2.9% = 728.74 944.88 They saved, I lost

2018 $725.74 +2.9% = 749.88 1198.56 They saved, I lost

2019 $749.88 +2.9% = 771.62 1459.44 They saved, I lost

2020 $771.62 +2.9% = 794.00 1728.00 They saved, I lost

Total $6714.72 They saved, I lost.

Over $6000 lost for not raising rents over a 6 year period on a low end $650/mo home.

So Terry, bite the bullet and raise your rents to current market. If not you are giving away money.

Do a simple spreadsheet on your 16 year res and see how much money you have lost. Plenty to cover the turnover costs if he leaves. Let it make you sick, and hopefully motivate you.

My 42 years experience says he will stay. He knows he cannot find another place for less.