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yes and no
generally you want keep good tenant even if that's slightly less profit than market price, however, in many cases raise rent is worth the hassle and find average tenant is not so difficult (depends on city and states law)
take that 20% rent increase for example, if the 20% rent increase is still within market price and landlord have no problem finding new tenant with new rent range, why wont they increase the rent?
landlord love good tenant, but they dont love tenant enough to lose 20% rent.
if i have to choose average tenant that pays me $1200 or great tenant that pays me $1000 a month, i will always choose $1200 average tenant, that's if $1200 is still acceptable by the market within the area and i dont have problem finding new tenants.
it's all about maximize profit that's still within market acceptance and still able to find average or above average tenants.
Maximizing profit by a few dollars at the risk of losing a good tenant, and possibly most or all of the profit if they move, is not worth it to me, personally.
And since this thread it about renting out a property (one property) for income and not high volume landlords, then we're not talking about a huge amount of money.
Is a rent increase if you factor in vacancy of at least 3 weeks and possibly 6 weeks or more really worth losing a respectful, long term good paying tenant? Using 20% which is quite high for a rent increase all at once and I don't even consider typical, just 3 weeks of vacancy (which is reasonable if you have to prep the place for new tenant, schedule showings, run apps, etc), can wipe out a chunk of the increase for the entire year. If you are conservative and anticipate 6 six weeks from the time the first tenant leaves until a new tenant is in a paying, most of that increase is gone, or maybe you're at a loss if you needed to replace carpets or repaint or any of those things when the old tenant moved out. We're talking maybe a few hundred dollars of possible gain at the risk of losing a good tenant, losing the increase, and possibly gaining a tenant that may be a headache at the minimum and cause you six months of grief and losses (and possibly damages to the unit) if you have an eviction situation and you live in a state where the laws favor bad tenants. Personally as a landlord myself, a few hundred dollars is NOT worth all of those additional variables on a PROVEN performing long term tenant that I know I can count on. Sure if you are a company with many units or buildings you manage by spreadsheet and factor vacancy and losses, then maybe every penny of profit is a top priority. But for small investors who are more concerned about having someone take care of the unit, pay on time, not cause the landlord grief, then a few hundred dollars of gain may not be worth the risk. In my case it is not worth the risk.
P.S. I also wasn't saying you shouldn't do a rent increase just saying on a good tenant be reasonable if you must do an increase and explain it to them. If you are clearly taking advantage of tenants they will know it and probably leave.
Last edited by luckydogg; 05-22-2018 at 07:07 AM..
Maximizing profit by a few dollars at the risk of losing a good tenant, and possibly most or all of the profit if they move, is not worth it to me, personally.
And since this thread it about renting out a property (one property) for income and not high volume landlords, then we're not talking about a huge amount of money.
Is a rent increase if you factor in vacancy of at least 3 weeks and possibly 6 weeks or more really worth losing a respectful, long term good paying tenant? Using 20% which is quite high for a rent increase all at once and I don't even consider typical, just 3 weeks of vacancy (which is reasonable if you have to prep the place for new tenant, schedule showings, run apps, etc), can wipe out a chunk of the increase for the entire year. If you are conservative and anticipate 6 six weeks from the time the first tenant leaves until a new tenant is in a paying, most of that increase is gone, or maybe you're at a loss if you needed to replace carpets or repaint or any of those things when the old tenant moved out. We're talking maybe a few hundred dollars of possible gain at the risk of losing a good tenant, losing the increase, and possibly gaining a tenant that may be a headache at the minimum and cause you six months of grief and losses (and possibly damages to the unit) if you have an eviction situation and you live in a state where the laws favor bad tenants. Personally as a landlord myself, a few hundred dollars is NOT worth all of those additional variables on a PROVEN performing long term tenant that I know I can count on. Sure if you are a company with many units or buildings you manage by spreadsheet and factor vacancy and losses, then maybe every penny of profit is a top priority. But for small investors who are more concerned about having someone take care of the unit, pay on time, not cause the landlord grief, then a few hundred dollars of gain may not be worth the risk. In my case it is not worth the risk.
P.S. I also wasn't saying you shouldn't do a rent increase just saying on a good tenant be reasonable if you must do an increase and explain it to them. If you are clearly taking advantage of tenants they will know it and probably leave.
few things i would like to point out.
1. we are talking about at least almost $5000 differences yearly, not few hundreds dollars.
2. most of the time you should have new and old tenant lease connected perfectly so you dont lose any monthly rent, 6 weeks or 3 weeks vacancy is too much and probably either rent is overpriced or just very bad rental market, and in that case, just dont do rental in that area at all. which is why i mentioned many time that rents has to stay within acceptable price range so you have enough prospective tenant to avoid vacancy.
3. i wanted average tenant who pays good rent, not sucky-eviction-tenant or great tenant who pays 70% of market price. finding middle ground and maximize the profit.
4. those tenant protective states like CA or NY are just bad investment for small investor who want do rental business, disregard how great or bad the tenants are.
5. i am not saying up the rent disregarding everything, you still have to consider the market, and how much can you increase, however, when the circumstance allowed (enough interest from other prospective tenants, significant increase on the rent/profit), rent will go up, i can give great tenant slight discount of being nice, but i am not giving 20% discount that's few thousands dollars every year.
1. we are talking about at least almost $5000 differences yearly, not few hundreds dollars.
Where are you getting $5000 from? In your example you are using 1000 with a 20% increase, that's not 5,000. Even if it's 2000 that still doesn't come to 5,000. I am using average rents in the US, which I believe is somewhere between 1,200 to 1,400. I am not talking luxury homes or homes in a market like california or NY where there is zero vacancy. I am talking about average rents in average cities.
Where are you getting $5000 from? In your example you are using 1000 with a 20% increase, that's not 5,000. Even if it's 2000 that still doesn't come to 5,000. I am using average rents in the US, which I believe is somewhere between 1,200 to 1,400. I am not talking luxury homes or homes in a market like california or NY where there is zero vacancy. I am talking about average rents in average cities.
Anyway you can do it your way, i'll do it mine.
Quote:
Yikes chao! That would be my approach to renting out apartment units but NOT a house. A great tenant in a house is worth more than $200 or $400 a month - they don’t call about small problems, they fix things themselves without calling for a ($$) repair service, they garden like it is their own yard, and they keep the house pristine. They are members of the neighborhood and community and they help to keep all of the property values increasing. No way would I risk losing that tenant for an unnecessary price increase.
yearly, as someone mentioned about $400 month rent differences earlier, 400x12 = $4800 yearly.
take myself for example, i am small investor who only do this as part time and only own+manage less than 10 properties, but for $200 differences per unit every month, we are talking about over 20k differences every year, now imagine those big investor who owns plenty apartment buildings, hundreds of units.....you get the idea.
it's good to have tenant take care the property for you for small discount on rent, but if let's not give away big portion of your profit just so you can save some management time.
if you want hassle free way of renting out property, find a reliable management company who charge you 10% of the rent and get your house on market at good price, that's better than just give big discount to what to be considered great tenant.
All my expenses on my rental properties increase annually — taxes, insurance and maintenance/repair costs. Its not logical to me that a Landlord would not increase rent annually.
I own the homes outright, my insurance pretty much stays the same, upkeep has been pretty much the same, and these are more upscale homes, I prefer to keep the same tenant as long as I can so the wood flooring isn't all scratched, walls, damaged etc. It has worked for me my tenants take care of the homes like they are theirs. When they move its touch up and rent again. We were at the top of the rent market 3 years ago now we are about $100 cheaper than other similar homes. I prefer long term tenants if the houses were cheaper maybe I would feel differently.
Yes, I have rentals, but being a landlord IS NOT for everyone. You have to treat it like a business. I manage my own rentals, but I do use a tenant screening service which I'm a big fan of. I've gotten great tenants. I do include landscaping service in my rentals. There is no way I'd leave that up to a tenant. I refuse to have the jungle rental home on a neighborhood street.
Silverfall,
I am looking for a good tenant screen service - could you share the name of yours? Thanks.
I am looking for a good tenant screen service - could you share the name of yours? Thanks.
It doesn’t take much time to do it yourself. Cozy.co (not .com) allows tenants to pay electronically and you can get an application and tenant credit/background check.
yes and no
generally you want keep good tenant even if that's slightly less profit than market price, however, in many cases raise rent is worth the hassle and find average tenant is not so difficult (depends on city and states law)
take that 20% rent increase for example, if the 20% rent increase is still within market price and landlord have no problem finding new tenant with new rent range, why wont they increase the rent?
landlord love good tenant, but they dont love tenant enough to lose 20% rent.
if i have to choose average tenant that pays me $1200 or great tenant that pays me $1000 a month, i will always choose $1200 average tenant, that's if $1200 is still acceptable by the market within the area and i dont have problem finding new tenants.
it's all about maximize profit that's still within market acceptance and still able to find average or above average tenants.
Atlanta Intown areas are hot right now and you should be able to quickly find good tenants. I compete again hedge fund rentals such as Invitation Homes and have no problems because we fix our rentals up to a higher standard in up and coming neighborhoods and attract good quality tenants that like living in close in areas even if they aren’t completely gentrified yet.
All that to say is is I always increase the rent even if it’s just $5 bucks, though usually more when a tenant leaves which mine stay from 2-4 years. A rental that I got $1500 last month I was getting only $1250 with a tenant that had been there 4 years. It was rented out in 2 weeks. I bought that property for $33k and I put in $45k in 2011. Comps show $245,000. Can’t find those anymore.
I would like to ask a question of anyone who has actually owned a house for the purpose of renting it out for extra income. I have a friend who is thinking of doing just that. I have never owned any kind of property - never even wanted to; so, I am not one to talk intelligently about doing this. If you have ever done this, did you feel it was worth the expense and extra work? What kind of luck did you have getting good, reliable renters?
Thank you.
I have done this once, and my son is doing it now. It worked out well for us, but there was some luck involved, and in both cases the properties have appreciated. It is said that you make your money when you buy a flip or rental house at the right price. Your friend needs to know all the expenses involved and whether or not the rent will cover them. He/she will need to be able to cover the expenses if the house is empty for a few months.He will need to screen the potential renters, or hire a mgmt company to do it. It is a lot easier to be picky than to get rid of a bad tenant.
Two separate scenarios, but both positive.
About 25 years ago, we lived in a new development adjacent to a neighborhood of modest, unimproved older homes. We decided to buy a cute cape cod and flip it for resale. My husband owned a company with employees who were capable of doing the work inside for us. When it was done, a friend of ours needed a place to live because of a divorce. She lived there for a couple of years and then another friend rented it for a year. Although we only broke even on the expenses, by this time, the property values had increased and we sold it and made about $40k profit.
#2
My son and his first wife built a starter house in a new development, at the height of the bubble. They split up a few years later and were upside down on the mortgage. My son, who lives in another state, still has the house and will perhaps sell when he can make a profit, but he has a fabulous long term tenant who treats the house as his own, and the tenant has no desire to leave. My son is making a couple of hundred$ a month, even though he has a management company handling it for him.
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