Raising Tenant Rent: Strategy and Tactics

[Coronita]

[quote=EconProf]I guess I didn’t make myself clear.
The market rent for one’s particular unit incorporates all the factors you bring up. The market rent for an extra nice unit, or a better location, or an ocean view, etc. will naturally be higher. A unit with negatives would command a lower market rent.
Accordingly, one should never charge “above market rent”. Again, the hard part is “price discovery”–to objectively look at comps and find your proper rent.[/quote]

You know I’m not so sure about this…

Call me old school. But I think a some (not all) of these bells and whistles extra might help you get more eyeballs in people interested in renting your place, BUT, personally I haven’t seen a situation in which having these fancier bells and whistles actually increases the price people are willing to pay for rent, IF there is a like-unit that is priced slightly lower that doesn’t have the bells and whistles.

I’ll give you an example comparing one property of mine to a comparable right next to me…

The “comparable”
1) Is 20 sqft bigger
2) Is upstairs instead of downstairs
3) Has granite counters, stainless steel appliances, tile, and upgraded bathrooms.

That condo, whom I spoke to the owner recently, rented out for a whopping $5/month more than my unit. Person also paid $15k more than i did in the purchase.

So I’m not convinced all those bells and whistles are really helping to increase what you can charge for rent. I think there is a threshold in which people say “this isn’t my house, and while fancier stuff is nice, I’m not willing to pay for it”

[spdrun]

(2) might not be a selling point, especially for someone older or with kids. Ground floor is nice if you’re lugging two bags of groceries and a screaming kidlet.

[no_such_reality]

Any one have a good tile guy? Our tenant moved out and it’s dropped something coming down the stairs and put a one inch by inch by 1/8th inch deep gouge chip out of the center of the 18 inch tiles

Since the tile was original builder upgrade prior owners didn’t leave any spares.

Unless a temecula area tile guy knows where to find a match I suspect we may rip out the very nice tile and put in engineered wood. I heard we can maybe patch it however the hole is right about where a woman’s heel will land coming of the stairs so I have very little stomach “good enough”

For the OP you may wish to figure out how a simple move out accident affects your $100/month

[spdrun]

Center tile just after coming off the stairs? Remove and put in a decorative/mosaic tile.

Or patch the hole with a good two-part epoxy with a bit of chopped glass fiber mixed in, then paint with a model enamel. This stuff is used to repair engine blocks. A high heel won’t faze it. Worst that will happen is that the enamel will peel off eventually, but that won’t kill anyone.

[no_such_reality]

Not center enough but thanks for the idea. I’ve read about the epoxy blending it in visually will be the challenge but probably can be done. Beyond my tile expertise level though since looking for a tile guy that what’s a very easy couple hour job for some extra discretionary spending money

The stairs land entering the main open living area. A patch may stick out like a sore thumb visually. If there’s a very obvious patch my wife will feel like we’re being slumlords.

[spdrun]

As long as you’re getting rent and the tenant isn’t complaining, who cares about feeling like a slumlord?

Other thing you can do is take off all the tiles facing the step and put in a decorative area of tile, call it a threshold. Then center position wouldn’t matter.

[no_such_reality]

You’re not married?

Tiles for the area are arranged with a 1/2 tile border around entire floor. The gouge hit center but on the corner most none border tile. There is no tile landing area separate from the entire floor.

Rentals in the area need to be maintained well since there is plenty of new build and nice rentals. If you let the rental in that area start to show wear you limit your applicant pool to those that don’t care or can’t do better. And pretty much guarantee high wear and major turnover expense

[Hobie]

Tile- patching with paint -may- work but not ideal for high traffic. Can’t remove tile to find a match without cracking/breaking entire piece.

Probably best to replace with clic together floor. Order some extras and arraige layout so if future damage occurs in same area you can easlily replace.

[spdrun]

Nope. Got pictures of the area? Maybe someone can suggest something.

BTW – all of the slumlords that I’ve heard of would NOT fix the area. Epoxying/sanding/matching an enamel color would already be a very non-slumlordy thing to do.

If you have someone that won’t take a unit because of a 1″ x 1″ discoloration on a tile, I’m pretty sure you don’t want them anyway. Imagine them obsessing about tiny things (“the faucet has a little bubble in the chrome”) and calling you about them at 2 am…

[no_such_reality]

LOL True I don’t want someone obsessing over a patch but other wise it needs to be patched as if it was in our own house

IOW it can’t look like a cheap patch but like something a reasonable home owner would do for their house instead of replacing the entire floor

And more importantly. It needs to be level and smooth and consistent with the tile because of liability issue for stepping of the stair. What I’ve read is the epoxy an be hard to keep level and consistent with the tile

I was looking at the color and blending may not be that hard. It’s got natural greenish neutral natural style look.

[Coronita]

[quote=no_such_reality]Any one have a good tile guy? Our tenant moved out and it’s dropped something coming down the stairs and put a one inch by inch by 1/8th inch deep gouge chip out of the center of the 18 inch tiles

Since the tile was original builder upgrade prior owners didn’t leave any spares.

Unless a temecula area tile guy knows where to find a match I suspect we may rip out the very nice tile and put in engineered wood. I heard we can maybe patch it however the hole is right about where a woman’s heel will land coming of the stairs so I have very little stomach “good enough”

For the OP you may wish to figure out how a simple move out accident affects your $100/month[/quote]

So this is interesting. What do you plan on doing wrto the the tenant’s deposit? Are you going to bill them for the entire tile replacement? It seems like if you do, they will pushback and tell you just to replace 1 tile .. I’m just curious in this situation, would you end up eating most of the cost?

Tile suck for high traffic areas in a rental… It’s cheaper per sqft than say laminate or vinyl or wood these days (material wise), but I’d be worried of tenants dropping stupid stuff on it….But then again, I’m not someone that can afford to do high end rentals (yet)…

Can you take out that tile and maybe 5-6 tiles around it, to make it look like a pattern of some sort…

[spdrun]

If you’re the one installing new tiles, then just buy 10% extra and keep it for repairs.

[NotCranky]

[quote=CA renter]Great post, Russ.[/quote]
Thanks!

[(former)FormerSanDiegan]

1. perspective: $1200 a year is about 0.4% of the current value of the property.

2. Your rent will track market rents in the long term, but you don’t have to raise it continuously. When this tenant leaves you will raise to market rent. In the long run rents will track higher in discrete steps where those steps up are between tenants. Raising rent increases the probability of turnover. All you are giving up for lower turnover is the difference between a curve with steps and a continuous curve.

3. Look at the big picture. What is your alternative if you sell ?

Case 1: you sell.
You might clear $75-80K after selling costs.
If you invest that 75-80K and somehow get 5% in something just as risky as real estate, such as a REIT, that amounts to about $4000 a year.

Case 2: you keep.
You’re probably paying down $300 + in principal with each payment. So your tenant pays down $3600 per year of your principal. This is a direct increase to your net worth. Your costs went up by $1200, so figure a $2400 per year economic net.

So, to match the $4000 in case 1, you need the property to appreciate by $1600 this year. That’s a 0.5% appreciation. Add in another 0.5% to cover maintenance costs.
So by my guesstimate, if the property increases by 1% a year or more you come out ahead of case #1 where you sold and invested for a 5% return.

4. Think long term.
If you think long term, $100 a month is in the noise. In a couple years the tenant will leave and you’ll raise the rent by $100-200. Your principal portion will steadily increase. At some point in your loan term (around year 12 or so, depending on the rate), the principal is about half the monthly payment. Five years from now, you’ll be cash flow positive, with a loan balance also dropping by $6 k or more a year.

[Coronita]

I think the OP is just venting frustration that happens every so often with a rental property, especially when one is starting out…

I (hope) cooler head will prevail, and the realization that it isn’t *that* bad. In fact, I’d say it’s not bad at all…..

There are plenty of people that probably with the itchy rental/landlord finger that either haven’t gone through this yet or missed out over this cycle…

It’s all good.

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