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Landlords...I need your advice. I have an owner occupied duplex. Well, one side has paid the exact same amount in rent ($600) for the past 4-5 years. This year, I'm definitely doing a rent increase. It's a 2BR, 1.5BA 800sqft unit. Lawn care provided. I didn't know if I should raise it to $650 or $675? Main reason I'm doing this is because my mortgage has gone up (property taxes) and I provide monthly lawn care.
What makes me nervous is the possibility that I may lose the current tenants. They are an elderly couple and have never been late on a payment. But really, times have changed and $600 is low for rent in this area. It gets you a 1BR apartment.
If they moved out tomorrow, how much could you rent it for?
Is the difference between what they are paying and what you could get for it, more than one month's rent ($600) plus the cost of getting their unit in shape to show it to applicants?
Let's say it costs you $500 in paint, cleaning, repairs, etc., and your tenants move out and it takes you 1 month to get new tenants paying rent again. Your cost in this case would be $1100.
Now, look at how long it will take to recoup that $1100 with the increase in rent. Without knowing what you could get for it tomorrow at market rate with a new tenant, I can't be more specific than that.
Also, consider future vacancies. If you rent it for more to someone new, but they leave in a year, you have to factor in another month's lost rent.
So, if you think these guys will stay forever, that's something to consider, too.
On the other hand, you should be raising the rent a little every year. Even just $25 - 35.00 for instance. People won't normally move out over $35. Especially after they hit Craigslist to see what their options are, and they realize they have it really good right where they are.
And, you don't need an excuse or reason to raise the rent. This is business, not a charity. Sometimes it helps - if they ask - to say your costs have gone up. But, I wouldn't start out by groveling and explaining to them why you have to do it.
Depends on what area you are in? In CA we have some counties that are rent controlled. In my county you have to give the tenant 60 days notice if you increase the rent more than 10 percent.
I think you will be fine if you give your tenants a good lead time to decide what they want to do when they get the increase notice. Or perhaps raise the rent $40 now and then $40 next year?
And, you don't need an excuse or reason to raise the rent. This is business, not a charity. Sometimes it helps - if they ask - to say your costs have gone up. But, I wouldn't start out by groveling and explaining to them why you have to do it.
Exactly! Once you open the door to that conversation it's hard to close it. The mega-plexes don't give reasons with rent hikes.
........ if I should raise it to $650 or $675? Main reason I'm doing this is because my mortgage has gone up (property taxes) and I provide monthly lawn care.........times have changed and $600 is low for rent in this area. .........
My personal belief is that rent shouldn't be raised more than 10%. So $675 would be too much all at one time.
You have to look around and see what can be had for the new rent price. Your tenants are going to look to see whether they should pay the increase or move. If they can't find a place cheaper, they will stay. If other places for the rent amount aren't as nice, they will stay, unless they are really broke. Most people won't downgrade their living conditions to save $50 a month.
You have to look at what comparable rents are. If your tenants move out, what price will you offer the house for when looking for a new tenant. I don't think it is worth risking the loss of a good tenant if all you can gain is $50 a month. However, if the rent can go up by $300 a month, it is time to give the current tenants an annual price bump.
If the rent difference is large, try balancing the raises so that you can gradually get the rent up but still not lose good tenants.
After looking at the town I live in, only 11 rentals (some are duplicates) pop up. Our area is pretty desirable. One apartment was charging $690, a mobile home was charging $625, and two other properties are going for $675 and $685.
When I didn't live in the unit beside the tenants, it was being rented out for $650/month. You would just hope they wouldn't leave over $50 because there's nothing like what they are living in anywhere around here for that price.
If they're good long term tenants and are on a fixed income, a $50 or $75 rent increase may be a real hardship and encourage them to look elsewhere.
Their rent may be lower than similar units in the area and landlording IS a business but you need to think this through very carefully. A $5 or $10 increase may well be doable for them but when SS income increases are as minimal as they are, a $50-$75 rent increase can be huge. Just as your rent is below the norm, other private landlords are out there too so you're not the only game in town and, if they take good care of your property and pay their rent on time, you may well end up (if they move) with someone on the way other end of the spectrum.
A landlord in your state can usually raise the rent as much as she or he likes after giving a 30 days notice unless their tenants are in a ongoing lease.
That's a huge increase for elderly and personally. I would not do an increase if they are long term good tenants that requires little maintenance.
The increase in your property tax is a hit toward your profit but it also increase deduction for your tax purpose. I was faced with this situation in 2014 when all the properties tax on my rentals doubled. I decided it was not worth losing tenants (even though my rent is below market) but I rather know what I have then risking new tenants.
The way I did it was I sat down with each tenants when going over their lease renewal and explained how the rent prices had changed with tax increases. Told them that I will absorb the hit this year and that I may not be able to take it next year and may have to raise the rent the next year.
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