Rent increase ?

[endobear]

I have a good Tennant that's been renting from me for about 7 years. Our taxes and insurance has gone up quite a bit in that time. It's time for a new lease and I'm considering raising his rent a little. He's paying $2800 a month for our 2200sqft newly remodeled house, detatched 2 car garage, 10x20 out building, on 1acre fenced corner lot in the mountains west of Denver.
I don't want to chase him off but what would be a good amount to raise it to?
Rental market for similar properties in the area are in the $3300 and up range.

 

[Xring01]

If it where me….
assuming this is a good renter, and takes care of the property and pays on time.

I would literally schedule a meeting with them, share your side of the equation and have a discussion. And do my best to reach an agreement…

But if its a renter that doesnt take care of the property or pay on time… he gets a letter in the mail, $3400/month and no negotiations.

But thats me.

 

[HALLETT BOY]

Rentals are a business , you have expenses. Raise it , but keep it below neighboring properties and let him know . I have the exact same issue .

 

[ltbaney1]

not having a dog in the fight, but i think @Xring01 has the right idea. if they take good care of the place and dont give you any headaches, have a conversation with them and see where you land. i dont have renters, but if it were me, i would place some value on how they treat the place and you.

 

[Groper]

I do on occasion will visit a good tenant to discuss things this, he knows what the market is for rent in the area, and he knows he hasn't had an increase for years they all talk about it with others.
I would call him and ask if it's ok to stop by ask if he might need any repairs or maintenance performed on the property, ask him how long he plans on living here and then start the conversation of the cost increases that you're incurring and tell him what the new lease will be and go from there.

 

[Desert Whaler]

My Dad has a rental which eventually will be mine.
He is charging the tenants less than 1/2 of what the current market is !
He's older and thinks if he raises the rent, the tenants will leave.
He's super stubborn and I told him, "That would be the BEST thing that could happen, because then you could get new tenants and get what the place is worth" !!!
I think in our city you're only allowed to raise the rent 10% a year. I try to explain to him that even if he raises the rent 10% EVERY year, he'd never get caught up! Especially with inflation, taxes, and cost of living.
He hasn't raised the rent on them for almost 10 years, and the people know they are SCORING.
It's a husband/ wife with no kids and a room mate, all 3 work and are just making out like bandits.
To top it off, not only does he pay the landscaper (standard), he pays their water bill cause he likes to water the lawn & plants !

 

[JUSTWANNARACE]

My Dad has a rental which eventually will be mine.
He is charging the tenants less than 1/2 of what the current market is !
He's older and thinks if he raises the rent, the tenants will leave.
He's super stubborn and I told him, "That would be the BEST thing that could happen, because then you could get new tenants and get what the place is worth" !!!
I think in our city you're only allowed to raise the rent 10% a year. I try to explain to him that even if he raises the rent 10% EVERY year, he'd never get caught up! Especially with inflation, taxes, and cost of living.
He hasn't raised the rent on them for almost 10 years, and the people know they are SCORING.
It's a husband/ wife with no kids and a room mate, all 3 work and are just making out like bandits.
To top it off, not only does he pay the landscaper (standard), he pays their water bill cause he likes to water the lawn & plants !

If he is happy with what he is getting and happy with the tenants, why change? Especially if they keep good care of the house. Kick them out to make a few more $ could turn into more of a headache than its worth.

I'm gonna miss these "common sence" old timers when they are gone. It's not always about the $ with them, and that's what I'll miss!

 

[Motor Boater]

If I have a good renter I try not to raise the rent. I’m in a situation now where I’m about $400 -$500 under current pricing so I’m going to raise it $200. You can also have a convo with them and say you need to raise it but you will ramp it up. $100 for the first year and then $200 the second year or whatever timeframe you pick.

 

[Mrs. Riley1]

We purchased a rental property last year. It came with a tenant that has been there for 15 years. The previous owner had not raised her rent at all during that time. When we purchased the property we sat down with her and discussed the rent situation and that our mortgage was much higher than what she was paying. We told her we would have to raise the rent and she understood. We kept the increase as minimal as possible because she takes care of all her own maintenance and put all the landscaping in on her own and we don’t want her to leave. Her rent is still well under market value. I think if you have a good tenant you should do everything you can to keep them.

 

[HB2Havasu]

If he's a great renter and is already covering your nut for mortgage, insurance, and taxes I would probably let sleeping dogs lay.

If the above is not so I would simply just call him and communicate your problem regarding tax and insurance increases and your going to have to bump up his lease payments accordingly. I find most people are more accepting of cost increases if it's verbally communicated. The worst that could happen is he doesn't want to pay the increase and leaves, allowing you to rent for full market value.

 

[Mandelon]

If you are not near market rent you are taking money out of your pocket and giving it to them every month. Does he realize he is giving away $6000 a year?

I keep mine just under, and have no vacancies. I have had tenants for a long time. They don't complain much, I don't have to do much and we all benefit.

Having turnovers costs quite a bit. You have to paint, rehab and lose a month or two of income on top of it.
But you do get to bring the price up to market rent. Better to keep it close all the time.

 

[petie6464]

My thought is this. . Every tenant is replaceable, I raise rents all the time on good tenants. I have these properties to make money period. I've had many good tenants, when one goes away another comes along.

 

[Desert Whaler]

If he is happy with what he is getting and happy with the tenants, why change? Especially if they keep good care of the house. Kick them out to make a few more $ could turn into more of a headache than its worth.

I'm gonna miss these "common sence" old timers when they are gone. It's not always about the $ with them, and that's what I'll miss!

I agree, but it's a pretty big chunk of his income, and I've noticed he's been really cutting back on expenses like cancelling cable, his landline phone etc.
It's a 3 bed 2 bath nice single story in the a really quiet part of HB on a cul-de-sac and a 1/4 mile from the beach. He charges them $2,200.00

 

[Cdog]

You can tell the difference between the people that own rentals, the people that want to own rentals and the people that rent in this thread.


Mandelon nails it again.

 

[Dkahnjob]

I have a commercial building and the lease has a provision for cost of living increase every year, plus any increase in tenants share of Property tax increase.
Last year the property tax didn't change any so no change, this year the cost cost of living increase for Los Angeles/Orange counties is 7.9% so I have given notice that we are going up by 7%. So far the tenants are not happy, I may have to compromise a bit, I don't want to loose them.

 

[Groper]

I agree, but it's a pretty big chunk of his income, and I've noticed he's been really cutting back on expenses like cancelling cable, his landline phone etc.
It's a 3 bed 2 bath nice single story in the a really quiet part of HB on a cul-de-sac and a 1/4 mile from the beach. He charges them $2,200.00

UHHH yeah no sorry but the rent goes up here to $4k+
It's a business not a friendship, don't get too cozy with your tenant.

I have a commercial building and the lease has a provision for cost of living increase every year, plus any increase in tenants share of Property tax increase.
Last year the property tax didn't change any so no change, this year the cost of living increase for Los Angeles/Orange counties is 7.9% so I have given notice that we are going up by 7%. So far the tenants are not happy, I may have to compromise a bit, I don't want to loose them.

I'm in the same situation but I have a guy that does the negotiating on my commercial leases and I haven't heard anything yet, I'm sure I'll be having a conversation pretty soon on this topic, my property expenses have also increased so there will defiantly be some sort of adjustments.

 

[LuauLounge]

My next door neighbor has been renting since 1999. I knew the owner before he passed, he bought it, completely remodeled it and rented it. He had about 25 units in the area. His kids are multi millionaires, but still follow the old man's lead. You never make a good tenant leave.

 

[ka0tyk]

If you raise it and he bails you'd be out a month or more of income. You'll get a new tenant, they gotta give 30 days on theirs, start a new agreement with you 30 days out. You're in the hole now $2200. Plus cleaning expenses, credit check, etc... What if it takes 2 months to find someone new? What if your new tenant doesnt pay? your existing one is in good standing...

 

[Havasu blue label]

If you need to compare local rents that’s not good . You have your financial obligations on that property and your time and maintenance

 

[kimbalee]

If it where me….
assuming this is a good renter, and takes care of the property and pays on time.

I would literally schedule a meeting with them, share your side of the equation and have a discussion. And do my best to reach an agreement…

But if its a renter that doesnt take care of the property or pay on time… he gets a letter in the mail, $3400/month and no negotiations.

But thats me.

I agree 100% - a good renter is worth its weight in gold, especially if you're in a state where property owners have absolutely no rights like commiefornia. Took us 6 months to get ours out after getting a lawyer (renter's wife was an OR charge nurse in LA - they made $200k+ a yr). They delayed the sale of our rental house which in turn delayed the build of our new out of state home for more than a year which has literally doubled the cost of our build bc of the massive cost increases in materials. Find a happy medium with a good renter.

Edit - oh and they trashed the house when they got the eviction letter so we had those expenses too.

 

[Xring01]

I agree 100% - a good renter is worth its weight in gold, especially if you're in a state where property owners have absolutely no rights like commiefornia. Took us 6 months to get ours out after getting a lawyer (renter's wife was an OR charge nurse in LA - they made $200k+ a yr). They delayed the sale of our rental house which in turn delayed the build of our new out of state home for more than a year which has literally doubled the cost of our build bc of the massive cost increases in materials. Find a happy medium with a good renter.

Edit - oh and they trashed the house when they got the eviction letter so we had those expenses too.

Thats the key reason why I stated to sit down with a good renter and negotiate. Nothing says you have to drop your pants, but put your cards on the table and show them some respect. If they are good renters, then they most likely will show you the same respect.

A buddy of mine owns over 30 houses in the Temecula/Murrieta area… And he doesnt have any mortgages… Thats how he rolls. Do you best to take care of the renter, while making good business decisions, and he thinks he comes out ahead in the long run..

 

[endobear]

He's a good Tennant. Not a great one. He's never late on rent and didn't pull any crap with the rent forgiveness bullshit during the scamdemic.
Being my 1st home I'm deeply attached to it. That being said I doubt anyone would take care of it like I did/do and that's my only gripe with him.
I shot him a text and we are going to meet this afternoon to discuss signing another 2 year lease and scheduling to get my painters in to freshen up the exterior. I'll let him know about the tax and insurance increases since he's been there and see how the conversation goes.
I'm leaning towards only raising it 100 to 200 hundred a month to keep him In the house.

 

[Ziggy]

My Dad has a rental which eventually will be mine.
He is charging the tenants less than 1/2 of what the current market is !
He's older and thinks if he raises the rent, the tenants will leave.
He's super stubborn and I told him, "That would be the BEST thing that could happen, because then you could get new tenants and get what the place is worth" !!!
I think in our city you're only allowed to raise the rent 10% a year. I try to explain to him that even if he raises the rent 10% EVERY year, he'd never get caught up! Especially with inflation, taxes, and cost of living.
He hasn't raised the rent on them for almost 10 years, and the people know they are SCORING.
It's a husband/ wife with no kids and a room mate, all 3 work and are just making out like bandits.
To top it off, not only does he pay the landscaper (standard), he pays their water bill cause he likes to water the lawn & plants !

Eventually, when it is yours, you can do with it as you wish. Right now it's still dads.

 

[Desert Whaler]

Eventually, when it is yours, you can do with it as you wish. Right now it's still dads.

Yeah, I totally get it.
He's a REALLY good guy.
Quick story.
I had taken him to the VA to get his Army records a while back cause he wanted the Veterans designation on his drivers license for discounts at Home Depot etc.
The gal in there was looking over his records from Korea and saw that he'd had a really good service record and talked to him about some financial benefits that he could easily receive. He said, "No thanks, I'm ok and don't need any financial help, give it to the younger guys who've served and need it".
I got goose bumps on that one.

 

[Maw]

I was having this same basic discussion with the wife yesterday. She believes that we're low on all our rentals (Hunt Bch and Westminster areas) based upon Zillow "rentimates". What is a reasonably accurate means of establishing rental prices, aside from canvassing the area and asking the locals?

 

[cofooter]

There is a lot of value in a known entity that takes care of and respects your property. You may get more rent from someone new, but then maybe more headaches and expenses in the future. I would raise it to what is need to cover your expenses and margin, but not to market prices. Have a discussion with him on why you think that is a fair compromise.

 

[JUSTWANNARACE]

Yeah, I totally get it.
He's a REALLY good guy.
Quick story.
I had taken him to the VA to get his Army records a while back cause he wanted the Veterans designation on his drivers license for discounts at Home Depot etc.
The gal in there was looking over his records from Korea and saw that he'd had a really good service record and talked to him about some financial benefits that he could easily receive. He said, "No thanks, I'm ok and don't need any financial help, give it to the younger guys who've served and need it".
I got goose bumps on that one.

And this is why your dad charges them what he does!!! Pay it forward!!

Like I said, it's not always about the $ as long as the Bill's are met.. but that is going to the wayside pretty quick!!


Hats off to your dad, and I thank him for his service!

 

[NicPaus]

$200 sounds fair. Or $100 first year $200 second on 2 year lease is beyond fair.

 

[RiverDave]

If it where me….
assuming this is a good renter, and takes care of the property and pays on time.

I would literally schedule a meeting with them, share your side of the equation and have a discussion. And do my best to reach an agreement…

But if its a renter that doesnt take care of the property or pay on time… he gets a letter in the mail, $3400/month and no negotiations.

But thats me.

I would do this. But I’d be firm on the pricing.

 

[Mandelon]

I was having this same basic discussion with the wife yesterday. She believes that we're low on all our rentals (Hunt Bch and Westminster areas) based upon Zillow "rentimates". What is a reasonably accurate means of establishing rental prices, aside from canvassing the area and asking the locals?

Zillow, Craigslist, local property managers, ask what's available. They are usually nice to you because they want your business...

 

[COCA COLA COWBOY]

Minimum $3000. I would personally go to $3150 and show the value he is getting. I like to read out the tenants situation and look at his face when I tell him that I'm raising rates. You can tell a lot by someone's physical reactions. Then I would explain what comparable rents are....$3300 and wait to hear his response. His response may provide you your answer right away.

 

[boatdoc55]

As was said before, most States have a max one can raise the rate. Mine in Oregon for this year, 2022, is 9.9%.

 

[badgas]

@Desert Whaler

Waitress : Can I take your order ?

Dad: Sure, 3 Coors lights and I'm buying.

Tenants : Thank you !

Dad: Hey guys I want to thank you all for being such great tenants for the past 8 years. It has come to my attention that $2,200 is way below the market rent for a 3/2 in HB. This is my fault for not adressing this years ago but with that said i'm going to have to raise your rent. I have here 4 like properties ranging from $3500-$4300 My plan because you have been good renters is to keep you guys on the low side at $3500 so i'm going to raise the rent by $650 per month for the next two years to get you guys up to $3500.00 We can discuss market rates again in two years.

Tenants: That sounds like a good plan let's do it.

They would do this in a minute. I have a nephew with his wife and young baby leaving their HB apartment 2 bed with no garage because the rent is approaching 4K

If your Dad feels better do it over 3 years but explain he is not running a charity. I had a 3/2 condo in RSM that was $2300 Low IMO and I had good renters so I kept it low for for them. Two single moms with their kids. When I sold it to buy the Havasu house they moved right into $3200 lease. My point is they had the money.

 

[Shlbyntro]

boy am I glad my landlord isn't on RDP

 

[Desert Whaler]

@badgas

Thanks. That would be ideal.
From my understanding you can only raise rent legally in CA by 10% in a 12 month period.
I looked at his records and the last time he raised it to $2200 was in October of 2015.
I read him some of this thread and he agreed that he needs to raise it.
But he can only legally raise it by $220 / month.

 

[Joe mama]

I’ve been on both sides of this and when I raised rent on a good tenant, I’m the one who got screwed. The next two tenants destroyed the place to the point I was over it... I no it’s a business but I take that shit personally.

 

[buck35]

This must be why yaall love California... fuck anybody for a buck.

 

[badgas]

This must be why yaall love California... fuck anybody for a buck.

It's not that easy !

Not everybody has a home paid off free and clear. Some people have rental properties that have a mortgage and property taxes and HOAs or property management fees repair fees etc etc

Not everyone is a slumlord looking to scalp people.

Not every property owner is trying to eff someone for a buck but they are trying to get some return on their investment just like if they had a construction company or a taco shop or a cleaning service or if they put money that they had into the stock market etc.

They need to make money on their investment if they don't it's just charity and that's okay charity is a wonderful thing but not every property owner is just trying screw someone over.

Just like business owners some are good some are bad I heard a contractor recently say that he would charge $20,000 to do a standard small bathroom remodel one vanity one toilet and a shower.

That is obviously effing someone for a buck. My brother who flips houses gets those bathrooms done all day long very nice for $7,000 somewhere in the middle there's $13,000 of nonsense going on.

Anyway it's a good topic. California actually has very very low rents compared to the value of the home.

For example my brother rents a 1.5-1.6 million dollar home very close to the water in Huntington Beach for like $3,600 a month.

I have a friend who owns homes and Memphis Tennessee that are worth $125,000 and they rent for $1,000 a month.

Go figure !

I'm not sticking up for California because this place is a crap hole but respectively rents are pretty cheap

 

[endobear]

So my conversation with my tenant went well. Explained to him about my tax and insurance going up over the last 7 years and that they are good tenants and I'd like for them to stay but I've got to raise the rent slightly. I then asked him what he was comfortable with me raising it to.
He was cool with 100-200$.
I also let him know I wasn't trying to catch up with the rental market but if he did decide to move I'd be charging at least $500 more than he is paying now.
Which would be $12000 in my pocket over a 2 year lease.

 

[bonesfab]

I am about to join this fiasco. I am renting my Camarillo house to an employee and his fiance. I am giving them a break on the rent on the condition I am not doing a total make over on it. It will cover my payment and then some. Try to play the good karma thing forward and see what happens.

 

[Groper]

I am about to join this fiasco. I am renting my Camarillo house to an employee and his fiance. I am giving them a break on the rent on the condition I am not doing a total make over on it. It will cover my payment and then some. Try to play the good karma thing forward and see what happens.

Nope !!!
It's a bad idea, don't do it.
It all feels good in the beginning like meeting a new chic but once you get to really know she'll be difficult to get rid of, too me rentals are a business period not a 501C Charitable Organization sure you can help someone out temporarily but not long term just make it perfectly clear in writing.
I've done something similar in two different situations many years ago and it turned into a nightmare when they went BK, it bit me in the a$$ !!
I still have the teeth marks

 

[81eliminator]

@badgas

Thanks. That would be ideal.
From my understanding you can only raise rent legally in CA by 10% in a 12 month period.
I looked at his records and the last time he raised it to $2200 was in October of 2015.
I read him some of this thread and he agreed that he needs to raise it.
But he can only legally raise it by $220 / month.

This is what I was told by a property manager, you can raise it CPI plus 5% not to exceed 10% per year in CA.

 

[drew_built]

We have good tenants, rent goes up 100.00 a year on some and others every 2 years Rents are pretty fair, no where near the houses down the streets that can’t keep tenants or have to make major repairs every time someone moves out

all our renters have been long term or referrals from the last renter

The best part of happy renters is Not one missed a payment through COVID, they understand we as owners have bills too

 

[pronstar]

My mentor has dozens of properties.
Raises the rent 3% minimum every year just to keep up with inflation.

Homes are always nice for the area but these are C-class neighborhoods.

Renters stay for 6 years on average.

Are you in this for business, or are you a charity?

IMHO it’s best to run a business like a business.
Get emotionally involved, get a soft spot for a tenant, and you’re literally taking food off your table and handing it to them.

Housing demand is outstripping supply.
There’s another renter or 10 waiting in the wings.

 

[Bpracing1127]

I’ve been doing 5% every other year. This year I think it’s going to go up 7-10% we have had these tenants for 5+ years now. So I am hesitating going over 5%.

I might do 5% every year now tho

 

[PaPaG]

Bottom line is that this is a business, you invested your hard earned money into property with the goal of making money and possibly helping set up your future/retirement and not be Santa. More than likely the tenant knows the local rental rates and has kept quit for so long hoping to keep the rent low. Increase his rent 7% and let him know you will be increasing 5% every year there after until you bring it up to market value. If they decide to stay great, if they decide to move then go through the place and re-rent for market value..either way you make more on your investment.

 

[Mandelon]

5% of 1000 is only $50 a month. They should be able to tolerate that, at least until you get close to market rent.

I try not to raise rents at Christmas time. I usually do it June 1st. Paying Xmas bills is already hard enough for some of these
folks. Most of my rentals are in lower income areas. I try to be sensitive to their issues, but it is a business after all. Looking at what I paid for these
places and what they are worth now... that makes me feel OK about not getting every single dollar out of them.

 

[TimeBandit]

I've had the same renter since August 2016, I have only raised the rent as much as my taxes and insurance have gone up, from $2,950 initially to now $3,010.

August 1st, it goes to $3,040. The property is free and clear.

My understanding is single family homes have no rules in Los Angeles county so I could raise the rent any time as much as I want.

No missed payments during covid, pays the rent by the 5th every month, has a cleaning lady every week, zero damage.

That said with the current value of the home I would rather sell it and never worry about collecting the rent or an earthquake ever again!

But I will cross that bridge if she ever wants to move.

 

[dezrtracer]

Too funny not to post , but had too . Raise the rent to cover cost. There is always another good renter ready to move in. I'm not into renting for charity...