Ten year tenant, She started out with a couple of roommates, ended up getting married over that time and had a baby who is almost 3 now! Time flies.

We have raised their rent a few times over the years but rent has gone up SO FAST here in the last two years they are now $350 under market. However they are in a 10-year old place. It's pretty spotless though. They are Russian and very clean.

We went there today to discuss a rent raise and learned he's been sick this year and isn't having any luck with a diagnosis, between his bad insurance and our local doctors (not great...)

So he is going back to Serbia next week for some medical treatments. He will get back in, he's a citizen and so is she.

But they are rather broke as a result...

We had planned to bring them up $200 but I'm sure she couldn't do it alone while he is gone.

Ideas?

I'm thinking $50 for a few months, then another $50 after he gets back and back to work, then another $50 a few months later and so on. Built into the lease on a schedule (they are month to month right now, I let it lapse during Covid.)

I’m in the same boat with all my places. Every one received a 6%-10% increase recently. Increases ranged from $55 to $160. All are still a couple hundred below market value. Not a one batter an eye and was just relieved I wasn’t selling. My 11 year tenant, similar to yours will be going from $1065 to $1130. And it’s still several hundred below market even as-is.

He has balked before. He knows better now. I only wish they’d complain or move. They’d be doing me a favor.

This sounds like a good candidate for a “you tell us what you believe your increase should be”

Side note: I thought O-Care resolved all the "bad insurance" issues? /s

Jason, I did that "choose your amount" thing when I told them they were $400 under. But I hinted that their neighbor, also a 10-year occupant, chose $200 as their increase.

Jason,

I’ve had mixed results with that in the past, about 50/50 success. In one case I was thinking of raising $25 and they raised themselves $80. In another I was thinking the same and they offered $5.

Makes me wonder if I should have tried that this year again.

For instance: Your current rent of $875 in today’s market should be $1200. How much of an increase do you feel comfortable with?

Instead I just raised it roughly 6% to $925. Or your current rent of $1620 in today’s market should be $2200. Instead I raised it 10% to $1780.

Our rents over the last two years alone are up 40%. It’s hard to raise it enough to keep up with that level of increases. But with cost increases this year being much higher I can’t keep with my normal 2%-3% increases.

Let me take a different approach:

Do the tenants qualify for COVID rental assistance? If so, that might help both of you if she qualifies.

Are there any aid agencies in the area where she can get some temporary assistance?

It sounds like she has been the perfect tenant - been there 10 years, keeps the place spotless, does not bother you, pays rent on time, etc. I would hold off on any rent increases for a couple more months to see if he gets better. If he is that sick, the last thing she needs to deal with is a rent increase.

You are not there to provide rental assistance for her, but, you can give them a couple more months of grace.

Yes, she will eventually need to pay more rent or move.

I agree with MMIT - perfect candidate for rental assistance.

Tonight's news said only 17% of the billion$$$ given to the states has been paid out.

Letting them suggest the new rate: We've had great success with that approach taught by Jeffrey. The LL does not have to accept the amount they propose. Out of the very few residents who countered with a proposed amount we negotiated an amount they could live with, higher than what they proposed.

A $400 increase is bigger than our increases.

Not to sound crass - it is what it is. The MARKET sets the price. A GOOD res is one who can pay the market rent while keeping the home in tact.

If they cannot pay they are no longer a GOOD res.

Sounds like they might be headed for a life change anyway. There are probably LLs in the area who have not brought rents up to market.

Hang on to your hat because if market rents have climbed that much so will your property tax bill. You'll need the increase. That's what happened in my county.

Look you chose to keep the rent low for 10 years. So don't make yourself into a fool now in your own eyes.

You like them even though you wouldn't tell them that directly-- so why punish them more-- if in fact they been up against it?

Brad, here locally they only reassess taxes every 7 years, or when a property changes hands. Which is good and bad, depending on the market in that assessment year.

I went to fill up my car with gas the other day. The price was $2.99 / gallon. WHAT?!?! I went in to talk to the person behind the counter. "Gas was only $1.59 last year! I don't want to pay the market price."

The attendant looks at me like my head was on sideways, laughed, and said, "Okay, well, you might have better luck down the road at the Qwikee Mart."

They didn't sell me the gas, even though it has DOUBLED in price. How rude, eh?

Fake story, but the moral is the same. The market is what the market is. If you did not go into this venture with the thought, "Hey I'm going to cut discounts for 10-years, clean, Russian tenants who have family medical problems" then why are you letting those facts guide your decisions?

$350 / month under market means you've probably lost almost $10,000 over the decade. If they had just decided to stop paying and demanded $10 grand from you, would you have been okay with that?

Same thing here, only it's happened slowly over time vs. one big hit. Amazing the things our brains will think we have to accept if we take it a bite at a time.

Time to get them up to market: now. No piddly $200.... you're still lose thousands per year. What could you do with those thousands? What things could you enjoy? What charities could you fund? What worthly local causes could you be the champion donor?

As it is, you have a charity right now: the Russian couple with medical issues. Is that what you set out to accomplish? If they were at market rate today, would you cut them down $350/month? $150/month?

Nope.

Get them up to market. File for rental assistance. Whatever it takes. Do something. Imagine you are looking for an asset manager for WMH, Inc. Would you hire you if you allowed you to lose $4000 - $5000 per year? I kind of doubt it. But that's where we are today. Needs to be fixed.

It's not cruel. It's business. Everyone else gets paid market rate. You should too. You deserve it. You get to decide who to make your charity.

Sid, they haven't been paying under market for ten years! These houses rented for only $1075 just 3 years ago, so only a $25 delta at that time. Rents held steady around here for years. People just didn't make the kind of money needed to pay more. We are a beach: income was mainly derived from supporting the tourist industry. Still is.

But when Covid hit, in a flash many of the former long-term rentals were either purchased as second homes to retreat from the city, or as remote-work first homes, OR turned into AirBnBs because of the eviction moratoriums. Supply of long-term rental homes is just dried up! So prices skyrocketed. What rented for $1075 went to $1325, now $1400 and probably more if I pushed it. HOWEVER, most people still don't make the money to support the higher rents. So if I go too high, I cut my supply chain of possible tenants.

WMH, the same thing here. Just since Covid, rent has gone up 30%.

I have really good tenants and they stuck with me and paid rent all through the moratorium. There are thousands of tenants out there who did not pay rent who are now looking to trick their way into new housing. I really do not want to dump my good tenants and have a vacancy.

So yes, rent has to go up but I am not taking the jump to full market all in one go. I'd rather leave a bit of rent on the table than to have a vacancy right now. But I will ease the rent upward. I plan on $100 increase at the next renewal.

If your guys can not pay for some rent increase and decide to move, at least if you have to re-rent, you will get much higher rent. But at least start easing them up closer to market.

I would bend over backwards for a 10 year tenant (sorry, myob) who kept the place in good shape and paid the rent.

However, these folks are on their way out. If U.S. doctor's can't diagnose him and he needs to return to a second world country with general medical care several steps down from here, he will end up on pubic assistance, disability, or just learn to live with whatever is wrong and continue to be "sickly" which means menial jobs due to lost time.

I would raise the rent a smidge for January 1 (since you can't do it until December anyway) and then tell them there will be small increases periodically.

W,

I forgot to add this :

Stay in control. That means you make the decision that is best for YOU and Hubby. If you are profitable, and I know you are, you don't have to squeeze every penny of rent.

What are your goals?

I now make decisions based on my life, not my bank accounts. Financial FREEDOM!!! allows me to choose - more work to rehab and re-rent or leave it alone and go to dinner.

I just bought 2 houses for full price, low ROI but also low Hassle Factor because they are ready to rent, no rehab expense and lost time, will be easy to provide income as we grow old. Keepers.

This is a 180 turn around for me, the guy who usually buys with nothing down on super cheap deals.

The purchase meets my new goals.

Just thinkin.

Sid,

I am in the exact same boat as WMH. I mean exactly.

But I agree with you 100%.

I am now a charity. But I’m ok with that and it benefits me more being as I don’t itemize and don’t get a tax benefit from charitable contributions. I do get a tax benefit by keeping my rents as they are.

If I donated $10,000 to charity I’d lose $10,000. If I lose $10,000 in rental income that I pay taxes on its only a $7,000 loss to me. So I’m getting more bang for my buck by not increasing rents to current market value.

I also have the peace of mind that comes with knowing I have quality long term tenants who always pay their rent and are easy to deal with.

And I get to direct how my charitable funds are being spent and can use them to support people who have been good to me. Hard working people. Not those already being supported by an array of programs being funded by my tax dollars but the people just above that threshold who are on their own.

So yes, it is my own charity or perhaps a form of profit sharing.

I just raised all my rents more than I ever have because I agree it’s important to keep up with routine cost increases. But they are all still around 20% below market value.

They would all do me a favor if they moved. But in the meantime I don’t mind providing them with affordable housing. It’s a far easier way to run a charitable foundation than by actually creating a charitable foundation.

Our reassessments are also every 7 years but they increase the values each year, ESPECIALLY when they realized how much values increased and the higher tax money they could collect. Mo' money gets them moving.

The politicians brag they did not increase tax RATES but the ASSESSOR (not the guy running for mayor) increased the assessed VALUES with the click of a mouse.

Lisa, interesting way of looking at it!