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Corn-fused, thank you for your input. It's good to know how others would feel in this situation. We haven't made the decision to raise it 6% yet. But the tenants do expect an annual 3% increase, because that is standard for our area and would be the case for them no matter where they moved in this city. Our condo is in Tarzana, a city within the Los Angeles county area. May I ask, where do you live? What are rental rates like in your city? How do LLs handle rent increases? Do you receive annual increases? May I ask what they are?
Does not matter where we live You asked how we feel about paying another $80 per month in rent when Last yr you only increased it by $40 ??
I like to know Has Your Payments went up? IF not how do you get your going in the Hole? You started them Low Because You Cant Keep Tenants Yet now that they proven to be Dependable you want to jack up the rent?
Corn-fused, thank you for your input. It's good to know how others would feel in this situation. We haven't made the decision to raise it 6% yet. But the tenants do expect an annual 3% increase, because that is standard for our area and would be the case for them no matter where they moved in this city. Our condo is in Tarzana, a city within the Los Angeles county area. May I ask, where do you live? What are rental rates like in your city? How do LLs handle rent increases? Do you receive annual increases? May I ask what they are?
Doesn't matter where I live. I took everything into consideration for CA where you live which is at a much larger scale than where I live. But the principal is the same % wise. And yes, sometimes I get rent increases however, many times they have not increased it at all because the longer I am here and prove to them what a good, reliable, quiet, respectful tenant I am the more they try and keep me here and happy.
And they can appreciate what that is worth and how much turnover actually costs them.
Does not matter where we live You asked how we feel about paying another $80 per month in rent when Last yr you only increased it by $40 ??
I like to know Has Your Payments went up? IF not how do you get your going in the Hole? You started them Low Because You Cant Keep Tenants Yet now that they proven to be Dependable you want to jack up the rent?
Location: St Thomas, USVI - Seattle, WA - Gulf Coast, TX
811 posts, read 1,147,408 times
Reputation: 2322
Quote:
Originally Posted by FairMindedLL
Hubby & I own a 2 bed/1 bath condo in SoCal and have had good tenants for the past 2 years, a married couple in their late 30s with no kids. The lease is coming up for renewal and I'm looking for opinions on what would be a fair increase considering we've made over $2000 in improvements to the condo in the past year at the tenants' request. The rent was $1350 in their first year and we raised it 3% ($40.50 increase or about $1391/month) when they signed the 2nd year lease. This year I'm considering raising it 6% ($83.43 increase or about $1474/month) because of the improvements, with a letter of explanation to the tenants 60 days before the lease is set to renew. We've tried our best to give the tenants everything they've asked for because we want happy tenants who stay put. We had new berber carpet installed, added a new toilet (the old one was fine, but I think the couple had issues with using a toilet that other tenants had used), hired a licensed contractor to build a door and frame between the vanity and shower for extra privacy, and purchased a bi-monthly pest control policy. Legally, pest control is the landlord's responsibility, but none of our other tenants have requested it in the past. We've tried to be good landlords, always responding immediately to any texts/emails/phone calls, even for very minor things. The couple is a bit persnickety, and have needed some handholding over minor issues, but have been good tenants overall and always pay their rent on time. The condo is not in a rent controlled area and the rent is below market. Similar 2 bed/1 bath condos within a 5 mile radius rent for $1500-$1700. With the 6% increase, the rent would still be well below the median price for the area. My question for both renters and landlords: do you think 6% is a fair increase, given the improvements we've made? Should we raise it less than 6%? More? Renters, if you got a notice saying your rent was increasing by $83 a month, would you run screaming for the hills and find a new place? Based on my research, my tenants would have a very hard time finding a place for the same price or less. All opinions are appreciated. Thank you.
Fairminded, I might be misunderstanding, but I'm not sure that all of these items could really be considered upgrades. Some of it sounds like standard maintenance, which should be budgeted for when determining your rental price/income. The broken pocket door issue, at the very least, sounds like a reasonable request to fix something that was broken. I think the pest control service is a pretty reasonable request as well, especially given that your lease dictates that to be your responsibility. You could have saved money by completing the service yourself, I suppose. If some of these items were true upgrades, I probably would have said no to completing them if my rental income was too low and I did not budget for them already. They signed a lease on a property with certain features and fixtures, and it should be easy to explain that to them. THIS is what they are paying for, not a newer, shinier, fancier condo. Your job is not to make your tenants' home fancier than what they rented. Your job IS to keep the existing fixtures, finishes, everything in good shape and working order. Spending money on those things is not a reason to raise rent. There will always be maintenance costs. I had a tenant, upon lease renewal, request new carpet. I said sure, if she'd like to pay a higher rent for the upgraded home when we completed the lease renewal (carpet was not worn or old to begin with, she just wanted a darker color). Of course she opted to keep her rent low instead. She continued to rent with me for another three, 1-year lease renewals (no new carpet during that time). I kept existing items in good working order, making repairs promptly where needed, and replacing anything worn or torn, but I said no to upgrade requests. I also never raised her rent. That was her reward for being a good tenant and it was my business decision to prevent an expensive vacancy and time-consuming re-rental process. I happily raised the rent substantially when life took her to a new location, as rental prices had increased quite a bit in that area over the years.
You've already figured out that vacancy is more expensive than keeping rent slightly lower. Even if the vacancy is only one month, sending your tenants packing out of frustration at a rent hike will be more costly than keeping their rent exactly the same (Your 6% rent increase will make you about $1000 over the year. One month of vacancy will cost you at least $1391.). If I were you, even if your place is only vacant for two weeks, I would not think that the headache of finding a new tenant and going through the whole turnover process is worth making a few hundred dollars over the next year. If a 3% increase is standard procedure in your area, then I might go with that. 6% will foster a bad relationship in my opinion. A good relationship with your tenants is worth money too, as you already know. In the future, just clearly communicate to them that you will not be completing upgrades at this discounted rental price
If you have simply priced the place too low and you don't think you'd have any trouble filling the vacancy should your tenants decide to move on, then gamble on it and raise the rent to whatever is fair in your market now. In the end, this has to be a business decision. If you can recover enough costs with the rent increase to more than compensate for a couple of weeks of vacancy, then go for it.
Does not matter where we live You asked how we feel about paying another $80 per month in rent when Last yr you only increased it by $40 ??
I like to know Has Your Payments went up? IF not how do you get your going in the Hole? You started them Low Because You Cant Keep Tenants Yet now that they proven to be Dependable you want to jack up the rent?
Actually, my HOA has gone up. The current rent we charge is less than our mortgage + HOA fees. There was a plumbing assessment on the property, which is divided amongst the owners. Add to that the annual property taxes and we have an even larger loss. Not a huge loss, but since I run this property as a business, I'm entitled to actually make a profit. However, I don't make a profit. Even in a rent controlled city (our condo is not rent controlled), the allowable annual increase is 3-8%, tied to the consumer price index, which will be released on Jun 18. Last year it was 3%. Reasonable landlords in non-rent controlled cities try to mirror the CPI to stay competitive with rent controlled areas, which are fast dwindling in LA because apartments are being converted to condos or demolished altogether. As a landlord in a non-rent controlled city, I could raise the rent to reflect the market price if I desired. However, my tenants would probably have a lot more to say about that kind of hike than the measly $83 I'm proposing for capital improvements. And yes, carpet, toilets and doorways are considered capital improvements, not just upkeep. With rental prices in the area being what they are, most tenants in a decent, below-market condo would probably pay an even larger increase knowing that it's more costly for them to move; their rent would also be higher for an equivalent place no matter where they go. However, I'm trying to find a happy medium, where I recoup some of my losses while also being reasonable and fair to my good tenants in what I charge. The 6% increase would only be for this year. Next year it would revert to the annual 3% increase. And believe me when I say, every LL in this area gets their 3% increase with rare exception.
The original carpet was always steam cleaned between tenants and in good shape. The tenants wanted new carpet. We probably wouldn't have replaced the carpet for another 1-2 years, but we did it early to keep them happy. But it still comes at a cost. Why is it unreasonable to recover some of those costs? Even with an $83 monthly increase, it will take us 2 years to recoup the $2000 we spent.
And attempting to squeeze my 4 person family back into in a 2 bedroom 850 s.f. condo while I wait for the price to rise so I can break even isn't an option.
Last edited by FairMindedLL; 06-03-2015 at 12:32 AM..
Location: St Thomas, USVI - Seattle, WA - Gulf Coast, TX
811 posts, read 1,147,408 times
Reputation: 2322
Quote:
Originally Posted by Katie1
I like to know Has Your Payments went up? IF not how do you get your going in the Hole? You started them Low Because You Cant Keep Tenants Yet now that they proven to be Dependable you want to jack up the rent?
I believe the OP is talking about recovering the unexpected expenses from the work that has been put into the place. Those are extra expenses beyond the mortgage payment, taxes, etc. The question is whether those expenses were due to standard maintenance or were true upgrades. An upgraded rental should fetch a higher rent. That's simple economics and it's fair. I'm not sure that's the case in this specific situation though.
And I'm so sorry Katie1 but I absolutely can't help myself from being a grammar nazi. It was too egregious: "HAVE your payments GONE up?"
None of the things you listed with the exception of the toilet were upgrades. And even the toilet wasn't a upgrade. They were repairs or upkeep. I have never punished my tenants for repairs that were needed. If they asked for something I felt was not needed I would simply decline. You did unnecessary repairs. None were unexpected but the majority were optional. The only necessary repair was the pocket door repair (if I'm reading right) the rest could be a simple no it's not in the budget. And it's not the tenants problem you're upside down.
None of it matters as to the what you fixed or your financial situation with the condo or how "unfair " it may be to raise the rent. You're below market rate and if you feel a rent hike is warranted raise the rent. If the tenants feel it's too much they will give notice move on and you start over. Btw if you're in California and they have been renting longer than 12 months you must give 60 day notice.
Thank you for your thoughtful & factual reply. I would disagree with your assessment that the items I listed weren't improvements. The berber carpet was an upgrade from the basic carpet we originally had in the unit. We could have gotten the much cheaper version, but went with a better quality carpet because it lasts longer and also makes the tenants happy. The pocket door could have been repaired, but they're problematic and tend to repeatedly come off track easily. So we had the pocket door framed out and a new door & frame put in a different location, thus, an upgrade from simply repairing what was there. And replacing an older but functional toilet with a new model is an upgrade if a new toilet wasn't necessary. Yes, these were all upgrades we could have declined, but they made the tenants happy while also improving the value of the condo.
You're right that the financial situation of the condo isn't relevant to whether or not we raise the rent. I only brought it up to illustrate that we aren't unfairly profiting on the backs of our tenants, since several posters seemed to take issue with the fact that property management should be run as a business that reasonably expects to turn a profit. As simple landlords who were forced into this situation by circumstance, we aren't making a profit, just trying to maintain our good credit. But we shouldn't be expected to lose money hand over fist just because a few renters on this board who don't appear to have ever owned a rental property can't grasp the concept of recouping expenses.
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