You are justified to raise rents after 3 years. But I wouldn’t do it personally if the rent is still 10% within the market price. The tenant may not move because the 3% increase, but psychologically, they may want to get back their money by calling your more for small issues and delay the needed maintenance.
You can ask them to sign a contract instead. I read that the contract is not really enforceable in CA but at least psychologically you get them more committed to stay.
But I would raise rents even if they are perfect tenants after 5 years (unlike AN)…but I will always price it under the market (e.g. 5-10% if they are perfect tenant). In fact, 10% under market is my threshold. I will try to keep it between 5-10% below market for perfect tenant.
