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Old 05-01-2017, 02:32 PM
 
66 posts, read 61,681 times
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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.
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Old 05-01-2017, 02:44 PM
 
Location: Riverside Ca
22,146 posts, read 33,381,488 times
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I ran into that problem. Easier for me as my tenant was not good so I didn't feel bad to give them notice to vacate. I had the same issue you are having

How many rent raises have you done in the 7 years the tenant has been with you? If you haven't done any rent raises simply give her notice and raise the rents long as you're not constricted by something like Sec8 or rent control. Otherwise you're simply subsidizing the tenant at 4-500 bucks a month.
Ultimately you're in business to make money. Simple as that. You're taking the risk you should get the rewards.
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Old 05-01-2017, 02:57 PM
 
66 posts, read 61,681 times
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I have done 1 rent raise for $50 about 4 years ago. My taxes are going up $30 a month and was thinking about doing that, but I know the financial situation is bad.
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Old 05-01-2017, 03:39 PM
 
Location: Phoenix, AZ area
3,365 posts, read 5,211,252 times
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Increase to $1600 is 3 months of vacancy at that rate or 4 at the current rate; if you think you can re-rent with a low vacancy period and without a large reinvestment I'd bump it to $1400-$1450 and see what happens. Carpet and paint need done at this point plus various other repairs so your real gain by running a long term tenant out is less than you think. Assuming the market is good for you right now, don't be too worried about running off a good tenant either since you could find another good tenant to replace them.

That's way too large of a difference to let it go IMO, why leave nearly $5k a year on the table and as time goes on it is only going to get worse. Paint and carpet (bedrooms only since I tile everything else) on a 1500 sq ft home here is about $3k-$5k so at $1600 it pays for itself fairly quickly.
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Old 05-01-2017, 03:58 PM
 
66 posts, read 61,681 times
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Quote:
Originally Posted by AZ Manager View Post
Increase to $1600 is 3 months of vacancy at that rate or 4 at the current rate; if you think you can re-rent with a low vacancy period and without a large reinvestment I'd bump it to $1400-$1450 and see what happens. Carpet and paint need done at this point plus various other repairs so your real gain by running a long term tenant out is less than you think. Assuming the market is good for you right now, don't be too worried about running off a good tenant either since you could find another good tenant to replace them.

That's way too large of a difference to let it go IMO, why leave nearly $5k a year on the table and as time goes on it is only going to get worse. Paint and carpet (bedrooms only since I tile everything else) on a 1500 sq ft home here is about $3k-$5k so at $1600 it pays for itself fairly quickly.
I'm not sure what it would rent for exactly. Saw an identical unit up for rent for $1600. What got me looking is the Fair Market Rent for the area on Section 8 is $1750 max. Use to be $1100 back when I first rented it.
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Old 05-01-2017, 04:54 PM
 
Location: San Diego, CA
3,545 posts, read 6,018,706 times
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My landlord has a few tenants that are way below market who have been there for 10+ years. He generally doesn't raise the rent beyond the occasional $50 raise every few years, but he brings the price closer to market (he deliberately stays a bit below) when someone moves out. His properties are paid for and he's more interested in keeping good tenants for the most part. YMMV.
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Old 05-01-2017, 06:36 PM
 
Location: Riverside Ca
22,146 posts, read 33,381,488 times
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Quote:
Originally Posted by truckinusa View Post
I'm not sure what it would rent for exactly. Saw an identical unit up for rent for $1600. What got me looking is the Fair Market Rent for the area on Section 8 is $1750 max. Use to be $1100 back when I first rented it.
Can the tenant afford the rent hike of $50/$75/$100? Can they ultimately get to where they pay going rate or close to it? I'm assuming no. Is the tenant worth keeping to you at the current rate or maybe a little bump?
If everything in your area is renting for $1600+ You shouldn't have a problem getting that or close to it.
It just means starting over with a new unknown tenant. Can you deal with it? If not maybe the safe thing is to just do a slight raise once a year. When you reached their affordability level they will let you know. Is this a Sec 8 housing?

I had tenants that have been with me for three to five years. I had no rent raise in all that time. I finally bumped everyone up 3%. Still below going rate by anywhere from 2-300 bucks (depending on the rental if I use current going rates ). But I can't justify raising rent 2-300 bucks. And I have no missed payments and the rentals are kept in good shape and clean. So I'm happy the way things are. Tenants are nice and they follow the rules. I'm more interested in a good tenant than that "yearly rent raise to keep up with the market".It's worth it to me to stay a bit below going rate. Also when I do raise the rent nobody can complain as I'm not charging what everyone else is

When I rerent I usually go look at what's in the area and then I go $100-150 under that. I still raise the rent from the last tenant price but it's still lower than going rate.
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Old 05-01-2017, 09:01 PM
 
66 posts, read 61,681 times
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Quote:
Originally Posted by Electrician4you View Post
Can the tenant afford the rent hike of $50/$75/$100? Can they ultimately get to where they pay going rate or close to it? I'm assuming no. Is the tenant worth keeping to you at the current rate or maybe a little bump?
If everything in your area is renting for $1600+ You shouldn't have a problem getting that or close to it.
It just means starting over with a new unknown tenant. Can you deal with it? If not maybe the safe thing is to just do a slight raise once a year. When you reached their affordability level they will let you know. Is this a Sec 8 housing?

I had tenants that have been with me for three to five years. I had no rent raise in all that time. I finally bumped everyone up 3%. Still below going rate by anywhere from 2-300 bucks (depending on the rental if I use current going rates ). But I can't justify raising rent 2-300 bucks. And I have no missed payments and the rentals are kept in good shape and clean. So I'm happy the way things are. Tenants are nice and they follow the rules. I'm more interested in a good tenant than that "yearly rent raise to keep up with the market".It's worth it to me to stay a bit below going rate. Also when I do raise the rent nobody can complain as I'm not charging what everyone else is

When I rerent I usually go look at what's in the area and then I go $100-150 under that. I still raise the rent from the last tenant price but it's still lower than going rate.
Makes sense. I was doing the same thing. I believe initially my rent was probably a tad high. No it is not section 8. I had contemplated renting it to section 8 seven years ago but decided against it when I found this good renter. Her husband died a few months back and I'm certain her income is quite limited. I think they were both on social security disability. Both had good jobs at one time. When I rented to them they made $6000 a month. Their health is failing and I think the lady may just have a few more years, but people surprise you. She might be around for another 10 years. Maybe that is worth the security I have at the moment. The mortgage is completely covered.
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Old 05-01-2017, 11:56 PM
 
33,016 posts, read 27,388,296 times
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Quote:
Originally Posted by Electrician4you View Post
I ran into that problem. Easier for me as my tenant was not good so I didn't feel bad to give them notice to vacate. I had the same issue you are having

How many rent raises have you done in the 7 years the tenant has been with you? If you haven't done any rent raises simply give her notice and raise the rents long as you're not constricted by something like Sec8 or rent control. Otherwise you're simply subsidizing the tenant at 4-500 bucks a month.
Ultimately you're in business to make money. Simple as that. You're taking the risk you should get the rewards.
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..
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Old 05-02-2017, 05:02 AM
 
Location: Riverside Ca
22,146 posts, read 33,381,488 times
Reputation: 35433
Quote:
Originally Posted by truckinusa View Post
Makes sense. I was doing the same thing. I believe initially my rent was probably a tad high. No it is not section 8. I had contemplated renting it to section 8 seven years ago but decided against it when I found this good renter. Her husband died a few months back and I'm certain her income is quite limited. I think they were both on social security disability. Both had good jobs at one time. When I rented to them they made $6000 a month. Their health is failing and I think the lady may just have a few more years, but people surprise you. She might be around for another 10 years. Maybe that is worth the security I have at the moment. The mortgage is completely covered.
It's really up to you. You have costs that keep adding up. If your property tax is going up $30 a month that's $360 a year less in your pocket. Not counting repairs and future reconditioning/remodel/repairswhich you need to budget for. Regardless labor rates do go up and so do parts. . Eventually those costs will catch up and eat away your profits to the point where you'll have to raise rates unreasonably high to catch up to going rate.



Quote:
Originally Posted by freemkt View Post
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..

At the minimum. While I enjoy the fact I have great rentals and I maintain them wel I'm still looking to make a profit. I'm not doing this as a hobby. I'm sorry you feel that I shouldn't be allowed to make a profit from my business. I pay taxes, took the investment risk because last I checked when the market took a dump I didn't get a bail out. I simply weathered the storm. No government branch came to my rescue.

The only relatively stable cost is the mortgage if it's a fixed 15/30. Even if it was bought cash what is a person supposed to do? You want to make a profit on your money. You're still taking a risk. Things can happen to a house. Termites, flood, weather damage, people damage. Repair costs from trade work can go up. Property taxes go up. Insurance goes up. Just because a house is bought cash and under Prop 13 (which is not everywhere) doesn't mean you don't have yearly costs that go up. If you think LL are in it for a net Zero at the end you're fooling yourself.

Unless you are into investing or saving your money while renting yes in the end renting is a risky proposition. The people that rent and give themselves a sabings and invest their money will do fine renting or owning.
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