How much to raise the rent on the best tenants ever?

Okay. my wife and I bought our first home three years ago this month. We bought a Side-by-side double, and rented out the other side.

Short story: We got the best tenants in the world. They take meticulous care of their side, they have offered to pint (not that we kept it in slums, but they just wanted to try a different color - a NICE COLOR - and we said sure. We then found out that they re-lenoliumed the bathroom themselves to go with the new paint job. We told them to knock off some dollars from the rent every few times they did this, both to thank tham, and encourage them to do it more often. When their lease came up the first time, we decided we got the lucky strike and did not raise their rent a penny.

Now, thanks to Bush’s America and oil tycoons crying poverty in the wake of a 10 Billion quater profit, Our prices for eveything have gone up.

Now, our Tenants pay their own heat and water and electricity. But our property taxes got hiked 48% this year… Yes… that’s right… 48%!

With the combination of that, the sewer and garbe going up (We pay ours and theirs due to potential liens against the house should they not be paid), we are wondering how much to up their rent.

We live in Northeast Pennsylvania, and we charge them 500 a month. Does 525 sound like too much? We’re new to all of this and we don’t want to scare them away. We also want to pay our bills and feel a bit more comfortable with gas prices shooting up like a junkie.

Your help is request TM’s! Please help me the way you always have :slight_smile:

My help will consist of moving this to IMHO, where you’ll get informed opinions rather than a specific answer.

samclem GQ moderator.

samclem, you fiend! You managed to move this thread just as I hit “post” to a well-constructed, well-thought-out reply (which is unusual for me!) :smiley:

The gist of said work of art was: $25/month isn’t too much. Especially if you keep knocking money off the rent when they do capital improvements.

If you really want to keep them and are raising the rent only to cover increased expenses, have you considered first working out exactly what that comes to on a monthly basis, and charging them only that? If so, you might also want to consider sitting down with them, showing where the expenses are going up, and that you’re not trying to be a gouging landlord.

$25 increase seems reasonable, but you should really run the numbers and figure out your expenses and how much you would need to increase it to break even.

I would say $25 is fine. If that’s all you need to continue covering your expenses, it’s a small enough increase that your tenants will understand if you explain it to them. A $20 or $15 increase will still fell pretty much the same to them, so if you feel that will cover as much of your expenses as you need, go with the $25 increase.

a 5% increase after two years seems very reasonable, but I agree that you should know exactly what the increases in taxes and other related expenses come to on a monthly basis and should share this knowledge w/ your tenants. I’m a landlord, let me emphasize how fortunate you are to have these tenants.
There are many thoughts on establishing a fair rental value. I personally believe that the annual rent should equal 10 to 12% of the value of the property being rented. Having said that, I again remind you that tenants of the quality you describe are hard to find and you should definitely factor that into the mix.

10% that would be absurdly high in Sydney. 5% would be more typical… then again, we are going through a housing boom which has swelled the number of investment properties.

That isn’t a product of the housing boom. For many, many years the rule of thumb in Oz is $1 per thousand in weekly rent, or as you say about 5%.

Ditto. I’m a landlord also. I’d like to ask: When is there lease actually due? personally if it were me; I’d bite the bullet, write them a short lease for 6 months and let them know at the end of this six months the lease will be going up.

Personally I would let them know your expenses have gone up but I wouldn’t go into detail. If you were to preach to me about taxes and what not I’d be saying to myself “Yeah, but who’s get’n the equity here?”

Also, don’t let on what great tenats they are, because then they might think they have a barganing chip and decide they don’t want to pay squat over $500.

But then again, I can be a bastard when it comes to business.

As a landlord, I want to keep such trophy tenants. Not only are they tenants but they are also good neighbors. That’s worth something.

The main question to ask yourself is what is the going “market” rate for similar rentals? How long does it take to rent out an empty place? If it’s a lot more and yours is obviously low, then yes I’d up the rent some but still on the low side.

also what work if any will you have to do before you can show the apartment. This stuff all costs money and your opportunity cost might be higher than an extra $25/month. I mean 25 bucks ain’t even a month’s rent over the course of a year, and you could have a vacant place for how long.

Dunno, I’ve rented to some piss poor tenants (that looked good) and then sat on an empty place for 2 months. When I get a good tenant I like to keep 'em. To me the $300 extra dollars a year seems like a poor trade off if you think that might cost your tenents.

Your tenents also sound like good people, so getting them to pay the tax increase might be more platable. “Hey guys, I don’t want to up your rent, but the taxes are costing me $25/month”

Hey the other thing I just thought of is if $ is a big deal to your tenets, then make a trade off that the rent stays the same and they do some more improvements.

they sound like great tenets so I’d go the extra mile, but that’s me.

Thank you all very very much for your thoughts on this subject. My whole crux is weighing rising costs with the best tenants ever. So, we all understand there’s a 5% increase on the one side to cover these costs (Should do that just fine). Here’s everything about them for the other side:

[ul]
[li]They Usually pay their rent a WEEK before it is due (The latest they have been in two years is is 2 days, and that was a holiday weekend)[/li][li]They’ve performed capital improvements on their own dime (painting/re-doing a floor).[/li][li]They’ve become freinds (we invited them to our wedding, and to a recent campfire outing with our friends and family – we did not know these people before they rented from us)[/li][li]They asked us if they could get a dog (They each have a child from a previous relationship – one lives with them and the other visits every other weekend), and we said no problem because we know they’d take care of the pet and cleaning up after it (Our original lease said no pets).[/li][li]They went and got the cutest f’ing puppy in the world![/li][li]To date, they have had one party, and they cleared it with us before they did.[/li][/ul]

So, you can see why I am hesitant to just raise the rent, even though I can justify it Tenants like these are a rare rare find from what you fine folk are telling me (Funny story: We ran our ad for the apartment for two weeks with not one response). The day AFTER our placement ended, they called and asked how soon they could move in, because the place they were living at had become very very rowdy and there was a stabbing in the hallway the night before and they want to get their kids out of that environemnt. They actually moved in about a month before we moved into our side (As the previous owners lived on the side we rented, while ours had been vacant a year or so and needed much improving).

Any more thoughts are greatly appriciated. :slight_smile:

I do pricing for a living, this is the right first step. The fact that your costs are going up is completely unrelated to the market price of housing in your area. If you want to keep them as customers, you have to provide them with a price at or below the prevailing rate, whatever that rate is. Make sure they get a better deal with you than they will get anywhere else.

Explaining the increase will not help you if they know they can get similar housing for $475 elsewhere. If you can tell them the prevailing rate for housing is $625, your increase to $525 will be a lot more palatable. All bets are off, though, if they flat out can’t afford it.

You will always be better off making pricing decisions based on the market for your product, rather than based entirely on your individual costs. Your costs are going up, so it is very fair to consider a price increase, but the final price needs to take the current market into account. Sometimes, the market will not bear an increase, and you just have to suck it up.

The first thing you should do is contact City Hall and ask how much you can go up on the rent.

After two years, 5% doesn’t seem excessive. And I work in rental property management.

Not a landlord… but I’ve been in quite a few places with differing ideas about how the landlord/teneant relationship should work.

First off… 500.00? American? WOW… living in Boston has some disadvantages. I am paying 1000+ utils for two bedrooms in a 140 year old house that is feeling its age. And I am getting a good deal considering prevailing rents around here. Man, numbers like that make me want to move…

As far as rent hikes go, I am always willing to entertain a hike as long as it is well justified. If my landlord were to come to me explaining the reasons for a moderate rent hike then I would gladly pay a bit more to keep my home. If the landlord is rasing the rates only to squeeze a few more bucks out of the prevailing market then I’m moving as soon as I can.

I’ve actually left two places for just such a reason. One being a corperate run community that over the time I was there more than doubled the rent… when I left it was heading for triple… for no reason other then greed.

This reminds me of when I a little kid. We lived in a 2 family in the Upper Bronx.
My parents had been renting the apartment for about 3 years without an increase and the Owner and my parents were now best friends. My father helped with the maintenance and my Mother and the Wife had parties together.
They were wonderful people.
One night our landlord ask his Mom (who lived in the Ground floor apartment) to watch all the kids, both families. He had my parents come upstairs, sat them down with a good bottle of wine, spent 10 minutes apologizing before he asked for a $10 increase. My Father was afraid they were selling or something else and laughed and explained his fears and offered $15 instead. We lived there 3 more years until they did sell. We moved to Jersey and they moved upstate. But my parents have stayed in touch with them for 35 years now.

The chances are $25 should not scare them off and I think you should explain the tax increase to them. Keep it friendly and they probably won’t mind.
I had an apartment back in ‘91 and it was only $525 and the raised it up to $550 after one year. We weren’t overjoyed, but it was reasonable and rents were going up all around us.

Our landlord just jumped us from $750 to $790, after two years with no increases (Baltimore suburb, BTW). He does anything we ask of him (exterminator, repairs, etc) and we’re awesome tenants. He apologized before he told me, and he also gave it to me in writing. We’re okay with that.

Don’t tell a tenant that they’re paying your tax increase. It’s likely tenants will feel since they don’t own the house, that the increase is your problem, and you have the equity not them. Just tell them that costs have gone up and this is the new rate. Don’t explain why for ten minutes, either they think the place is worth the rent or they don’t.

**Frumpy Jones ** did mention the other couple was now friends and they don’t want to lose them as tenants. Why is being nice and treating them as friends so bad. Why be cold hearted and business like about it. This would cause more bad feelings in this case IMHO.

Agreed. We’ve lived in our rented house for over four years now. Our landlords love us and raised the rent for the first time ever on the four year anniversary. They wrote a very nice letter explaining that they’re trying to cover their tax increase, etc.

We were very pleased with getting that explanation from them. It’s nice to know that someone isn’t just trying to make a killing off of you because they can get away with it, and we were already well aware that the costs of owning have gone up quite a bit these last few years.

I don’t see any issue with telling your tenants why you’re raising the rent; it’s more than most people will ever hear from their landlords, and it keeps a positive relationship between you going well.