I sent out notices a couple months ago letting tenants know that in April they would be receiving massive rent increases. Almost everyone is month to month. I advised if they thought they couldn’t handle the increase, it wouid be a good time to start searching for a new place. I also offered to provide a letter of reference for most of them. I am hoping for some turnovers. Even with my big increasees, I am afraid I will still be under market rent. I am seeing houses in my area at $1900 per month, I did have a January vacancy due to divorce, had well over 300 contacts in 5 days while I

NE,

Just to raise rents without a plan isn't a wise decision. When I wanted to raise rents in my 16 unit apartment property I didn't just send everyone a rent increase letter! Had I done that, I could have lost 1/3 of my tenants and cost me $50,000 in lost rent and remodeling costs. So instead I did the following:

When my first unit had a natural vacancy, I did a fantastic number on that unit -- a total remodel quickly. I put in a new kitchen with appliances. New laminate flooring. Mini-blinds. Then I easily rented it out for top dollar, establishing a higher "Base" rent for my building. All of the other tenants noticed that a tenant that had been paying $775 moved to a new building, and the landlord (myself) fixed up the old unit making it superior to anything on the market in the area at a competitive price, $1,500 per month.

So old tired unit was paying $775/per month. Fixed up it commanded $1,500/per month. So everyone could see that the value in todays market for a unit with a slap coat of paint, some new appliances and laminate flooring would go for around $1,200 per month.

SO any current tenant paying under $1,200 a month should get a rent increase. If they left I wouldn't care because I could fix it up and get between $1,200 to $1,500 per month.

So every month I raised two tenant's rent. One would pay it with a smile on their face and the other tenant would protest. I told them they had options. Pay the increase of $30-$50 per month or move.

Homer,

I think the reason many LL's hesitate to raise rents is because they 'fear having a vacancy'. My hesitancy stems from the fact all of my rents started out at 'above market' instead of 'below market' which many LLs seem to prefer. I have never understood why any LL would consciously rent anything at 'below market',..especially in this inflated rental market!!!

NE,

I raise the rent to cover my increases In taxes, insurance and increased maintenance costs from trade

people. It has been years since I lost a tenant due to reasonable increases.

I will join your round table discussion Roy.

I don't have very much experience to share, but with my first few tenants and turnovers, I never raised the rent.

Why? Because I didn't want to fix what wasn't broke. I was afraid of them moving even if I wasn't completely happy with them.

After learning from this site, I now have an automatic rent increase built into my lease (thank you Brad and others). I still need to figure out how to change it around in times of a market like we have now.

I try to raise the section 8 rents every year. Section 8 is allowing 7-8% increases this year.

On the non section 8 tenants, I am doing 5-10%. One tenant did a “self imposed” 11% increase last fall!

The short term rental had a 25% increase last fall. My wife wants to do another increase this spring.

6x6 said, "I welcome coaching from NE"

I think this is just great! Now he can preach to you instead of me. LOL

MMIT - That is the problem I always had with Section 8,...they determine the rent increases and not me. And if you don't want Section 8 tenants, just keep your rents above market and that will stop every one of them.

Plenty - why does talking with your own tenants bother you?

I, like many other landlords, have been hesistant to raise rents in the past and when I first started out LLing. I have been a landlord now for 25 years, and over the past 5-10 years, have gotten over the fear of vacancy. I do like t keep my rents a little below market value to obtain a good tenant, and like Robert (CA), I also like to maintain my properties in top of the line condition. I live by the premise that if I have a very nice apartment, I will hopefully attract better tenants.

Marcia (WI)

You said, 'a little below market = a good tenant'

I am just the opposite / 'a little above market = a good tenant.' And we both maintain our properties in top condition too.

Would anyone else like to comment here? Is there any correlation between the amount of rent quoted and the quality of tenant received?

Here's one consideration I rarely see discussed when talking about "market rent." In my experience, there's a range that is "market." As the rent gets higher, that range get broader.

Example: No one knows that house X's market rent is $679.31.

I find a variation of +- 10% to be within a reasonable "market rate."

So, a "$600 house" could rent anywhere between $540 - $660 and still be "at market" because it's equal to or less than 10% either way.

Likewise, a $2000 house could rent anywhere between $1800 - $2200 for the same reason and still be at market rate.

The reason for this is there are subtle variations like timing and the fact that not every house is precisely the same, but generally people think it terms of 2-bed house, 3-bed house, condo, apartment, etc.

So to be clear, when people say, "a little below market" what I'm hearing is they are already at the bottom end of the range and they go even lower. That's where trouble is. If you rented your $1000 house last year and today the market is $1,100...you're not doing badly. Just do your normal COLA and call it good. But if you rented a house for $1,000 five years ago and haven't done any COLA's, then you're probably missing out on $500 or so of income every year!

Stay sharp; stay focused. People who pay attention to their flocks and herds are following wisdom.

Sid,

When I talk market rent, I am only referring a relatively small neighborhood usually within a 6 block (not mile) radius of my vacant house. Rents can vary wildly when you look at similar houses but located all across town.

When I get a new tenant, the rent is absolutely the very top rate that I can get for the property. That usually keeps me for about 2 years and then I can do small annual increases.

Rents here, though, have gone crazy.

I will be raising this year. I'll wait and see what the market is doing, but right now plan on raising at the official rate of inflation.

I hate to loose my really good tenants. It's always a gamble getting new tenants,no matter how carefully you screen.

Anther issue here is that I simply can not get any sort of workman or handyman, or professional of any kind to do any work. So if I have a vacancy, I am not going to be able to call anyone to do any upgrades or repairs.

My good heat company, has a six month waiting list. I have a decent painter and it is the same, at least a six month waiting list. I've been trying to get someone to do some tile work and can't get anyone. I don't really want to lose a tenant and then have to go in and do all the cleaning and updating by myself. My knees won't take it an more.

Reasons for hesitation in raising rents: timidity, avoiding conflict, fear of rejection, tunnel vision of the potential tenant base, would rather be right than rich, want to be cheaper than competitors.

Increasing rents for LL’s afflicted with the aforementioned disorders is tough, it can be overcome.

IMHO, our current inflation rate has increased the cost of everything by 15 - 20% in the past 12 months. A 20% annual rent increase is required to stay even. It is time to disregard the value of past experience. It hasn’t been like this before.

My recent experience indicates that customers interest is not diminished by raising rents by 20%.

I think it really boils down to your viewpoint, micro VS macro.

In a normal year (not like recent 30% increases) I might raise rent from $950 to $1000. If the tenant moves out then I'm likely going to have a month vacancy while I paint and get it ready, in essence the vacancy costs $2000. It will take 40 months of higher rent to make that back. Is it really worth it from a micro view point?

Once you switch to looking at it from a macro level (XXX properties X $50 each = a lot of money yearly) the hesitancy goes pretty quickly. You realize just how much money you are leaving on the table by not raising rents little by little. That helps quell the hesitancy even in the most risk averse person.

Roy: After re-reading my post again, I guess I misspoke about having a lower than market rent = better tenants. What I really meant to say, is at the end of my post; a very nice apartment and keeping my units in top notch condition will attract a better tenant.

I didn't read through all the responses but in addition to the "fear of vacancy" you mention above, it's also "fear of the unknown".

I've read on here previously that tenants won't move out over token raises. Lower end tenants absolutely will move out over a $15 raise in rent.

Nicole,

I agree with everything you said. However, anybody who fears the unknown probably should not be a LL to begin with. You can fully screen someone but never really never know the tenant until after you have handed over the keys.