My policy is to look at market comparables and put your rents slightly below the average. Rental comps are just like for sale comps–location, size, condition, neighborhood, etc. all factor in to one right price for your rents. The reason you should come in slightly under the market rent is to keep your vacancy periods to a minimum, and to keep good tenants happy.
What is utterly unimportant is many of the factors people have been bringing up here: higher costs, your mortgage rate, how long you have had it, taxes, etc. The market doesn’t care. Supply and demand results in one single number for your market rate, and that is what you need to discover. Craigslist is a great tool for that. And yes, people, just like appraisers, disagree about that number. So you have to really do your research, and take a cold-eyed, clinical view of the evidence. With that ammunition, raise your rents as much as the market allows, minus a decent margin, more for a good tenant, less for a bad one.
This way a good tenant will have no reason to move, especially if they are rational consumers and also look at comparables.
I run 35 apartment units in a depressed part of the country. I have not raised my rents in six years, because the market remains weak and it won’t let me. My tenants think I am a nice guy for not raising rents. I’m not. I’m just listening to the market.
