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Property owners typically have fairly stable costs - barring the occasional tenant from hell - what with fixed-rate mortgages and property tax caps like Prop 13. It's certainly appropriate to raise rents commensurate with costs.
Having said that, unlike a landlord with a fixed-rate mortgage (or no mortgage at all, as many today are cash buyers), since renters typically cannot lock in their costs beyond 12 months, I consider renting very risky, especially in the long run..
Yup, because insurance, maintenance and repair costs never go up, right?
Spoken like someone who has never had the burden of homeownership, and therefore has no idea of the risk associated with it.
A renter's costs begins and ends with the rent they pay each month. Predictable and stable. You can't say that about the homeowner.
And you don't get to decide when it's "appropriate" to raise rents, the market does that.
I have 4 houses in a very expensive part of Dallas now. The property values and rents have gone up tremendously. I am currently renting one of my properties to a very loyal tenant. I have no issues other than I know I can't raise the rent. She is paying $1200, and the going rent is $1600-$1700. Wondering if I should just be happy with what I have and keep renting at this lower rate. She has been a tenant for 7 years now.
That was my question as well. My office manages 180 rentals, and we are in the process of raising the rent on about half of them. Those who were month to month were done in April, and then those whose leases came up in May and June are getting an increase in those months. The only reason the rest haven't had an increase is because they are in a lease term. As they come up for renewal, they will all have increases as well. A few of them, who haven't had increases in a while, are getting large increases that still keep them under market rate. So far, only a couple have decided to move as a result (maybe 2 or 3).
OP, are you in a rent stabilization area that only allows a certain amount of increase? If so, you should take the maximum allowed as often as allowed. If not, I'd bite the bullet, send an increase to $100 under market value, along with a letter that explains that since they are a good tenant, you are staying under market rate, but had to take an increase, as they were too far under market. If they move, then they move. Most of the time, people find that they can't rent anything similar for less money, so choose to stay.
Another option is to raise it $100 now, $100 next year, $100 the next year, until you are caught up with market rate. That gives the tenant time to adjust.
I see your most recent post that she is a recent widow. So then you have to decide whether you are a landlord as a business or a landlord as a charity. If you want to be a good guy and keep the rent at the same rate to help her out, you can do that. But if you want to raise the rent to market rate, don't feel too guilty about it. Landlording is a business. This is why many people hire a property manager to be the "bad guy" in the middle, and handle the things that are necessary to make a profit but that don't make you feel like the benevolent good guy you want to be.
Maybe a good compromise is to let her know that you will be raising the rent, but won't do it for 4 months (I would say 6, but that would put you mid winter, the worst time for a vacancy), or even next spring, so if she can't afford it, she should start looking now. If she finds something sooner, you can fix it up and rerent for higher ASAP. Since it is just her now, maybe she is already thinking about moving somewhere smaller.
I have 5 rental properties in Dallas. I have never NOT increased rent annually; even if its $15/month. Every year my taxes and insurance premiums go up on each of our rental houses and during the times I do a nominal increase my gap between expenses and rental income becomes more narrow. I do consider tenue and my estimate of ability to pay. However, also keep in mind that you allege on your annual tax return when you claim deductions on properties that you are charging "fair market rent." It is a condition of making deductions for rental property expenses.
I have a tenant who goes into freakout mode every single year at lease renewal time over the most minor increases. They pay about $300 below market. This year they received a my renewal notice and I am increasing the rent $75/month -- I provided them a 90 day advance warning and they have until May 15th to advise me if they are staying or going. If they leave, I will be leasing the place out $300 more than the present rent. They will need to move to Forney or Grand Prairie to get another house at their present rent. And I know there will be dozens of applicants standing in line to rent the place. Since I require 60 days' notice, I will have the place leased before/if they move. Althought they are good tenants, I am tired of their tantrums at lease renewal time. I tell every applicant that the rent will increase annually!
I own my properties to provide me income; and for the right tenants I am willing to stay on the low side of market rates. But there is a point where you have to determine how much less you are willing to take below market rates.
Property owners typically have fairly stable costs - barring the occasional tenant from hell - what with fixed-rate mortgages and property tax caps like Prop 13. It's certainly appropriate to raise rents commensurate with costs.
Having said that, unlike a landlord with a fixed-rate mortgage (or no mortgage at all, as many today are cash buyers), since renters typically cannot lock in their costs beyond 12 months, I consider renting very risky, especially in the long run..
Just fyi; in the past 5 years my taxes on my rental properties in Dallas (where the OP is a LL) have doubled! My insurance has also almost doubled.
My tenants, in the post I made above, leased their rental house from me at $900/mo. 5 years ago and right now their rent is $1175 in a neighborhood where rents are $1400-1600.
Small starter homes.
Taxes are about $3500 annually; Insurance is about $1200; maintenance varies alot. Then, there's mortgage for most landlords, too.
I have 4 houses in a very expensive part of Dallas now. The property values and rents have gone up tremendously. I am currently renting one of my properties to a very loyal tenant. I have no issues other than I know I can't raise the rent. She is paying $1200, and the going rent is $1600-$1700. Wondering if I should just be happy with what I have and keep renting at this lower rate. She has been a tenant for 7 years now.
The fact that you are having qualms about raising her rent tells me that you do have some care about her circumstances.
The standard advice to widows is to wait a year before making any major decisions, including living space decisions.
Do you have to make this decision right now? How are your other properties doing? Do you know whether both their incomes are needed to pay your rent? If they did, this question will probably resolve itself soon with no action on your part.
It sounds to me as if there really is no financial reason that compels you to raise her rent right now. It seems to me that this is one of those decisions that will come down to who you see in the mirror each morning and what you think of that person.
Yup, because insurance, maintenance and repair costs never go up, right?
Spoken like someone who has never had the burden of homeownership, and therefore has no idea of the risk associated with it.
A renter's costs begins and ends with the rent they pay each month. Predictable and stable. You can't say that about the homeowner.
And you don't get to decide when it's "appropriate" to raise rents, the market does that.
Major systems and components - like HVAC - have known expected lifespans and should be budgeted for monthly; there is no excuse for 'surprises' in repair and maintenance costs which can be feasibly estimated in advance. SOME ownership expenses WILL unexpectedly arise, but (barring a major casualty, many of which can be insured and thus mitigated) generally should not amount to a substantial proportion of total expenses.
A renter's costs begin and end with rent - under conventional landlording. Surely creative landlords and tenants could come up with different ways to allocate costs. e.g. So-called NNN ('triple net') leases are common in commercial leasing, where business tenants pay some property costs in addition to rent. Why can't residential leases do some of that as well? I'd be happy to pay property taxes on top of rent (initially adjusted to offset existing property taxes) just to shut up all the smirking homeowners who say renters don't pay property taxes. (And also to ensure that any property tax CUT trickles down to me.)
Just fyi; in the past 5 years my taxes on my rental properties in Dallas (where the OP is a LL) have doubled! My insurance has also almost doubled.
My tenants, in the post I made above, leased their rental house from me at $900/mo. 5 years ago and right now their rent is $1175 in a neighborhood where rents are $1400-1600.
Small starter homes.
Taxes are about $3500 annually; Insurance is about $1200; maintenance varies alot. Then, there's mortgage for most landlords, too.
Whoa, sounds like you have some YUGE property taxes. Part of that is because Texas - like most states - likes to soak rental properties so that owner-occupants can have lower tax rates.
Whoa, sounds like you have some YUGE property taxes. Part of that is because Texas - like most states - likes to soak rental properties so that owner-occupants can have lower tax rates.
Texas has no income tax so property taxes fund more things than in other states.
Major systems and components - like HVAC - have known expected lifespans and should be budgeted for monthly; there is no excuse for 'surprises' in repair and maintenance costs which can be feasibly estimated in advance. SOME ownership expenses WILL unexpectedly arise, but (barring a major casualty, many of which can be insured and thus mitigated) generally should not amount to a substantial proportion of total expenses.
A renter's costs begin and end with rent - under conventional landlording. Surely creative landlords and tenants could come up with different ways to allocate costs. e.g. So-called NNN ('triple net') leases are common in commercial leasing, where business tenants pay some property costs in addition to rent. Why can't residential leases do some of that as well? I'd be happy to pay property taxes on top of rent (initially adjusted to offset existing property taxes) just to shut up all the smirking homeowners who say renters don't pay property taxes. (And also to ensure that any property tax CUT trickles down to me.)
When you rent you are simply paying for a service. When you go to a mechanic you're not paying his electric bill. You're paying to get your car fixed. No different with the rent. You're paying for the use of a house as shelter.
What a LL does with the money is his business. You have no financial investment in the property so you shouldn't benefit from any gains/discounts/rebates etc that the LL gets. As if we get property tax reduction. Might as well ask for profit sharing. I'm surprised you didn't throw that in.
Yeah it's hard to find tenants to pay rent on time I'm sure some will rush right out and pay the property tax. On time.
Here is a idea, go buy your own rentals then you can be the benefactor to all the tenants who want all the things you want. You might last a year. Maybe
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