Raising rent prices…..yes or no….

[Coronita]

[quote=FlyerInHi]Business is business. Whatever the market will bear.
Take all the conditions into account and act accordingly.

Your costs are not a factor. The price should be what the conditions call for.[/quote]

So the conditions allow me to raise prices because I’m well below market. My question is it worth adjusting closer to market at this point…..

[Coronita]

[quote=deadzone]Why bother raising the price at all? If the tenants are good, and your expenses have only gone up slightly, why risk pissing off the tenant for a measly 3%.

Given you expect them to move out around the 5 year point, I recommend you plan to do a rent adjustment at the 5 year mark if they don’t move before then. At that time, maybe raise it 5% or more to compensate for your costs.[/quote]

True.. Though in the fallback plan that they do stay, rent will be so out of wack by that time that any reasonable adjustment, they will be in sticker shock…

[livinincali]

[quote=AN]You can do that, but you’re increasing the risk of your renter moving. You have to decide for yourself whether paying for vacancy, cleaning, maintenance is less than the extra rent you get. Sometime it is, sometime, it isn’t. You might think 1-2% hike is far from unreasonable, but it doesn’t matter if it reasonable or not. It’s all about if that’s enough to make your tenant move or not.[/quote]

1 month of vacancy is 8.3% of the total annual rent. It takes 2.8 years before you break even on a 3% increase in rent if increasing the rent results in the tenant moving out. Obviously it all depends on how inconvenient it is for the tenant to move and if they might already have plans of moving. Some people will just pay the extra $25-50 month, some will look at at other options and still decide to stay. Some will just move because they don’t like the principal or were just looking for an excuse to move anyways.

[an]

[quote=livinincali][quote=AN]You can do that, but you’re increasing the risk of your renter moving. You have to decide for yourself whether paying for vacancy, cleaning, maintenance is less than the extra rent you get. Sometime it is, sometime, it isn’t. You might think 1-2% hike is far from unreasonable, but it doesn’t matter if it reasonable or not. It’s all about if that’s enough to make your tenant move or not.[/quote]

1 month of vacancy is 8.3% of the total annual rent. It takes 2.8 years before you break even on a 3% increase in rent if increasing the rent results in the tenant moving out. Obviously it all depends on how inconvenient it is for the tenant to move and if they might already have plans of moving. Some people will just pay the extra $25-50 month, some will look at at other options and still decide to stay. Some will just move because they don’t like the principal or were just looking for an excuse to move anyways.[/quote]Yep, you’re just increasing your risk of having vacancy by raising rent. How much risk, only you can guess depending on your relationship with your tenant. But it’s definitely an increase compare to not raising rent.

[an]

[quote=spdrun]Why raise prices in any business to reflect increased costs of doing business? It’s a business, not a charity last I checked.

If the tenant gets pissed off, then they know where the door is.[/quote]No one is saying it’s a charity. But there’s a cost to raising prices. I don’t think it’s worth the hassle of vacancy and time to find new tenants, hosting open house/showing the place, etc. All of those are cost too. Those are the cost you don’t see until your tenant move out. Increasing rent will increase their likelihood of moving.

[spdrun]

The 8.3% vacancy risk assumes that it stays vacant for a month and that the likelihood of the tenant moving out is 100%. Neither of which are likely if the current rent is below market.

Give adequate notice of the rent hike, and you’ll know what the tenant plans to do well in advance, so you can start advertising the place before s/he leaves.

[Anonymous]

[quote=flu][quote=deadzone]Why bother raising the price at all? If the tenants are good, and your expenses have only gone up slightly, why risk pissing off the tenant for a measly 3%.

Given you expect them to move out around the 5 year point, I recommend you plan to do a rent adjustment at the 5 year mark if they don’t move before then. At that time, maybe raise it 5% or more to compensate for your costs.[/quote]

True.. Though in the fallback plan that they do stay, rent will be so out of wack by that time that any reasonable adjustment, they will be in sticker shock…[/quote]

Raising 3% now is certainly reasonable. I’m just pointing out that in general, good tenants are hard to find. If you like your tenants and want them to stay, I would gladly accept below market rent. On the other hand if I wanted them to leave, I would raise rent.

[CA renter]

[quote=spdrun]The 8.3% vacancy risk assumes that it stays vacant for a month and that the likelihood of the tenant moving out is 100%. Neither of which are likely if the current rent is below market.

Give adequate notice of the rent hike, and you’ll know what the tenant plans to do well in advance, so you can start advertising the place before s/he leaves.[/quote]

Don’t forget about other costs of turnover like paint, extra cleaning, maintenance & repair issues, etc.

[CA renter]

[quote=AN][quote=livinincali][quote=AN]You can do that, but you’re increasing the risk of your renter moving. You have to decide for yourself whether paying for vacancy, cleaning, maintenance is less than the extra rent you get. Sometime it is, sometime, it isn’t. You might think 1-2% hike is far from unreasonable, but it doesn’t matter if it reasonable or not. It’s all about if that’s enough to make your tenant move or not.[/quote]

1 month of vacancy is 8.3% of the total annual rent. It takes 2.8 years before you break even on a 3% increase in rent if increasing the rent results in the tenant moving out. Obviously it all depends on how inconvenient it is for the tenant to move and if they might already have plans of moving. Some people will just pay the extra $25-50 month, some will look at at other options and still decide to stay. Some will just move because they don’t like the principal or were just looking for an excuse to move anyways.[/quote]Yep, you’re just increasing your risk of having vacancy by raising rent. How much risk, only you can guess depending on your relationship with your tenant. But it’s definitely an increase compare to not raising rent.[/quote]

Agree with AN, livingincali, and deadzone.

Are your tenants doing basic maintenance and repairs? That counts for something, too. Chances are, if they aren’t calling you, they’re doing it themselves.

Most importantly, you know that you like these tenants. You don’t know what you’ll get if they move out.

[spdrun]

Don’t forget about other costs of turnover like paint, extra cleaning, maintenance & repair issues, etc.

If maintenance is needed, it can be done anyway. Paint is cheap. And I’m happy to do everything myself so labor is “free.”

[an]

[quote=spdrun]

Don’t forget about other costs of turnover like paint, extra cleaning, maintenance & repair issues, etc.

If maintenance is needed, it can be done anyway. Paint is cheap. And I’m happy to do everything myself so labor is “free.”[/quote]Time is not free.

[Hobie]

What is the condition of the unit? If it will be needing new flooring, repairs, renovation, then I would agree its time to up the rent to beef up your reserves.

If the unit is nice and the tenant has kept it nice, I might lean to not raising rent. If the rent increase pisses them off, maybe they will neglect/abuse things and end up costing you time/$$ when then move out. I guessing the rent delta is about $2k over a couple of years. So after repairs, is it a net gain?

Or, sign a new 2 year lease to keep the rent the same.

[treehugger]

We have been facing same dilemma, although have had same tenants for going on 5 years. This past year they were having some marriage problems and husband took over responsibility for paying rent….he is ALWAYS late (only by a few days and it is consistent, he and my husband text back and forth over it, so we plan for it now). Therefore, he ends up sending rent with $100 late fee and we have not raised the rent.

I really think that having good long term tenants has made us lazy. I know we could get a few hundred more a month for the place, but we cover all expenses plus and do nothing….to me it is totally worth not raising the rent to keep them as long as we can.

[FlyerInHi]

In Mira Mesa, near Sorrento valley, I would raise rents.
If the tenants leave you can turn it over with a couple weeks.

[carlsbadworker]

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.

[Author]

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