Back when I had apartments, I had the following policy on rent increases, which was explained to prospective tenants before renting to them:
“My rents are slightly under prevailing rents for comparable apartments. Over time, inflation and prevailing rents tend to go up. Your rent will be adjusted annually but will always be somewhat under prevailing rents.”
The goal, obviously, was to keep tenants but not be stuck with way-below market rents, which I consider foolish.
This policy assumes that prevailing market rents for comparable units can be determined thanks to craigslist and visits to the competition, tenants can discover such information or be presented with it, and tenants are rational and do not act out of emotion. Alas, the latter was not always true.
