Good morning Landlords - my question is about raising rents beginning 1/1/22. I have owned this 4plex for 16 years, for the past 6 years I have lived in one unit, daughter and son live in 2 units, and 1 tenant has lived in the other unit for 15 years. My question is, I'm barely breaking even on this place, it's no money-maker for sure. I've been advised to start charging for building utilities and services (1/4 for each unit - called RUB (ratio utility billing). On Dec 1 each year I send out rent increase letters arbitrarily increasing annual rent by $50; due to inflation and increases in utilities the $50 increase isn't cutting it anymore. So this year I'm increasing rent $125 a month based on the annual "calculated" cost of utilities and services, fyi, after the increase, all of the current rents will still be well below the average for our area.

I'm feeling nervous about sending out the letters on the 1st of Dec, I know it's going to be a big shock to the tenants, but I figure they will understand or exercise their option to move out...my thought is the new rent is still well below the average in the area, so hopefully they'll realize how good they've got it.

What do you think? Should I feel bad, or just rip off the bandaid?

move ahead with the rent increases.

With that letter , send them a copy of the rentometer . com rent report showing that they are still well below the rental market.

lets get this right- you live in one unit, son lives in a unit and daughter lives in a unit. This for a 4 plex. So one tenant for 15 years?

this is funny. your not an investor-- your a hobbyist!!!!

You got it made-- and your worrying about not making any money?-- who cares? really your family and yourself- are well taken care of. you got 1 tenant, who even if you increased the rent to market, would only net you maybe 800.00 a year. Life is to short. Keep doing what your doing cause you ain't doin it for profit. Don't think you ever had that intention.

I'm agreeing with Myob...no matter what you do this isn't going to be a "money maker." At best, the rent from one unit is doing to slightly offset your taxes, insurance, and maintenance, but you'll still be paying out of pocket for all of those things.

That said, I would bump it to market rate immediately. What is the current tenant going to do: refuse? Then they get to move and go pay market rate somewhere else instead of to you.

One of the worst mistakes I made early in my investing career was being afraid to raise rents. We've had in-depth discussion on that topic here for years. "Do it" is the consensus. You can leave it a tad (no more than 5%) below market as a courtesy if you like, but ultimately if you didn't buy this place to make money, I'm not sure why you bought it.

The IRS doesn’t recognize a family discount. They want realistic true market rents. If on paper you are losing too much and for too long expect an audit to explain your loses.

Son is close to market, small increase. Tenant of fifteen years- have you been in the unit recently? That tenant might be good to try Jeffrey’s letter about rent increases. Daughter, bring up to rent son is paying. She knows what he is paying , they talk. Even if she is going to feel a pinch.

Be prepared for us hack from daughter. I predict daughter might try to wiggle out of the increase, if she was able to finagle a special rate based on the idea she would save the difference.

...I know it's going to be a big shock to the tenants, but I figure they will understand...

The amount of rent isn't your big issue. These aren't "tenants", they are your children !!!!! What type of family doesn't discuss this type thing just as a matter of conversation and requires dad to send an arbitrary letter to his kids?

The 15 year tenant, raise more than the $50 but realize the amount of upgrades that will be required when that tenant vacates.

THANK YOU ALL for your constructive advice, I have carefully listened to you all, I'm so appreciative. Here's my plan... Yes, I did rip off the bandaid and mailed out the "rent increase letters" to all tenants. In my letter I explained that the "old" way of doing business in managing this apartment building is NO LONGER working for me. Starting in 2022, utilities and service for the building will be totaled and divided by 4 units; each tenant will pay their 1/4 share; for 2022 there will be no increase in rent. For 2023, rent will increase by 3% (or whatever cost of inflation is); cost of building utilities and services will be reevaluated and the price of cost of doing business will be passed along to the tenants as I started in 2022.

I'm thinking I should have been handling business in this fashion all along.

Before I moved into the one of the apartments in 2015, I didn't have to worry about this because all the tenants in 3 of the units usually only stayed for the 1 year lease term; after quick paint job and cleaning, I brought the rent up to the going rate for the new occupants, and I was good to go.

1. This years INFLATION FACTOR is over SIX PERCENT

2. labor and materials costs have gone WAY UP. Rents everywhere are up exponentially

3. Go go juice for our cars and that tuna sandwich and coffee now costs way more.

If you want to help resident family members, raise their rents to full market rent so your property is run at FAIR MARKET VALUE, and then gift them back Tax free money under the irs codes. This is tax free to them and you.

It reduces your net taxable estate upon your death. It gives you more gross rental income to be offset by MORE rental expenses. It increases the book value of your rental property. It gives you more cash in hand if you want to turn that two week vacation into three weeks.

It will then be perceived for what it indeed is by your family members ......A GIFT.

They are not moving anywhere

YOUR ACCOUNTANT should be telling you this.

Not your fellow landlords on this site.