If you own income property, the amount of rent collected has a direct bearing on the value of the entire property. Many buyers/investors look for properties that are renting under market to see the potentials if purchased. For those that rent apartment and homes and want to be charge a fair or a premium price, raising the rent may look easy but have consequences

LANDLORD THINKING

The owner wants either maximum return or fair return. That depends on the owner and his cap rate or return on investment strategy. This is different for everyone. Landlords that try to optimize their investment and command top dollar also have to keep the property up to above average standards both inside and outside of the units to demand that type of return.

LANDLORD ALTERNATE THINKING

For those landlords that prefer a steady long term return and are happy to have things run smoothly, those rents will be more lenient and the potential for both landlord and tenant to prosper stays on point. Everyone has incentive to make it work each one content in the part they play

RENTER THINKING

From the renters point of view, if they have been living in a place for more than a year and abiding by the rules etc, they would prefer to be left alone hoping that their payment history and conduct supports that. If they are targeted for an increase, then it is their hope it is a modest one allowing them to continue

POOR DECISIONS COST EVERYONE MONEY

Where it can get dicey is if a landlord raises rents without doing the homework and by doing so puts a strain on the renter and the renter ends having to move out, then perhaps this is a management style that needs to be examined. Having someone move out and then preparing the unit for someone else is costly

IS IT WORTH IT ....LANDLORD POINT OF VIEW

In addition, the loss of rent during the clean up stage plus the costs of advertising and repairs make it an expensive decision. The rule I always went by was to never raise rents more than the market could bear. Then, you assess the renter and see the value they bring by renting your place. Perhaps no increase or a modest one can be considered.

IS IT WORTH IT ....TENANT POINT OF VIEW

Having to look for another place, pack everything up, take time off, hire help, move, unpack and re-establish a nest all takes a toll. Consequently the renter will put a value on this and if it is reasonable, stay. If not, move. Having a rapport with your renters helps keep the channels open and caters to everyone's best interest so that this can be discussed

Think it through when it comes to the subject of raising rents

 

Richie Alan Naggar          Ran Right Realty       Riverside, Ca

Real Estate Broker and AUTHOR of the popular "PEARLS SERIES" of books on LIFE and LOVE

Richie@RanRightRealty.com         Richie@Pearlsforthesoul.com

PEOPLE FIRST...THEN BUSINESS

 
This post has been included in California Real Estate News

35 Comments on RAISING RENTS A SUBJECT THAT NOBODY REALLY LIKES

20 Most Recent Comments Displayed Show All

MAY
23
2012

Hello Richie,

I try to stay aware of the market by conducting market surveys. That can be as simple as picking up the telephone and calling a few competitors and seeing what type of numbers they charge. I then also try to ensure that I offer the best value for the price on a consistent basis.
9:02pm • #16

We condition our residents to expect a market review each year.  This encourages some to sign multi-year leases which work out nicely for the stability of all parties.  We strive to negotiate a win/win/win transaction whenever possible.  When a tenant opts to go with a single-year lease, they know we will be reviewing their lease and are not surprised when the market adjustment does not go in their favor.  They aren't thrilled but they definitely understand.  We operate in as transparent a manner as humanly possible.  This creates the goodwill necessary to enjoy long-term relationships with both owners and our residents. 
9:18pm • #17
MAY
24
2012
230,369 Points 9 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

I'm just going through this now with some rentals.  I have several long term tenants that have been in their units for as long as 12 to 19 years.  Do I increase rents closer to market or let things ride and avoid the costly updates to units when they move out.
12:09am • #19
1,455,172 Points 46 Featured Posts Outside Blog Called Shot Master

I am glad I read Wallace's comment. I keep the rent increase to a minimum but I like her formula.
3:52am • #20
1,113,109 Points 72 Featured Posts

Richie, Raising rents can certainly be inconvenient for both involved and have a negative approach for too. Moving costs can be high for the tenant, and missing a month or 2 of rent for the landlord can be a strain too. You provide could points for both sides!
4:29am • #21

@ Doug  (comment #22),  You are doing very well to have that kind of tenant stability!  I would recommend you share the current rent amount with the owner along with the projections for what would be required to bring the home up to retail condition.  Armed with that info, the owner can decide what works best for them and it makes you the hero.  I think most owners would prefer to keep long-term tenants happy and enjoy the stability as long as the rents are reasonably in line.  It needs to be a good deal for all parties.
5:37am • #22
379,375 Points 5 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

Ritchie, 

Love your rental rates & raises logic.  It's important to make smart financial decisions for owners and renters.

Keeping up with the market is critical.  We recently had a new rental unit we were going to list at $1,500.  The most previous rentals went at that rate.  Silly PM company who DIDN"T do their homework - listed a property for rent at $1,350 - the same as they leased it for last year or the year before.  How frustrating as they left money on the table for their owners.  We then listed at $1,450 to stay more in balance and leased quickly. 

KNOW YOUR MARKET!  Key fact.

All the best, Michelle
6:05am • #23
840,980 Points 69 Featured Posts Outside Blog Called Shot Master

 

Hello Joan...yes to your comment as well as gain & loss...It is definitely something that requires a second look

Kevin...When you bring humanity into it, I vote that way too...What we forget is that people get into the habit of budgeting and an increase has to come out of somewhere. If you can handle it, fine...but if not...? Thank you for the people perspective Kevin

Hello Jeff...I almost didn't recognize you...good job on the public relating of J.F. Yes to your comment...cause and effect comes to mind. Those that pay more..do they cut out or down on something else?

 
6:18am • #24
840,980 Points 69 Featured Posts Outside Blog Called Shot Master

 

Charles has the water seeking its own level approach...that's a level playing field and one that everyone can understand...thank u

Mark...you are describing a hands on management style based on the nature of the business...your position holds

 

Robert...sound and professional thinking here...If challenged, you can dialog effectively on the subject matter...

 
6:22am • #25
731,668 Points 15 Featured Posts Outside Blog Called Shot Master

Richie, commercial leases have annual built-in increases that are negotiated prior to lease signing. The increases are often geared to the CPI or set percentages. The tenant knows what they are getting into up front. A little different than residential real estate.
6:26am • #26
159,298 Points 2 Featured Posts Outside Blog Called Shot Master

Great post. I have my property manager raise rents yearly. My costs go up yearly so the cost must be passed on. In return I do keep an updated property and make renovations as needed or requested.
6:27am • #27
840,980 Points 69 Featured Posts Outside Blog Called Shot Master

Dave...the transparency comes through quite nicely in your commenting too...I like the people centered and matter approach accented with business principals...It promotes understanding and good relations....thank you Dave and consider upgrading your membership...It appears you have much to offer

Doug...meaningful question and very appropriate. It is definitely the heart of the matter...My personal approach would be to raise the rent gently and keep it way below market especially if the tenants in question are elderly and on fixed incomes. This is very subjective I know. Considering the steady return from stable rents over the years, when these people move, putting something back in for the next 20 year run makes good business sense. I would love to hear from others on this one

Gita...Wallace takes the professional approach and people who hire her for her expertise and management get their monies worth....

 

 
6:30am • #28
840,980 Points 69 Featured Posts Outside Blog Called Shot Master

Larry & Sheila...it is no walk in the park especially if your relationship is up close and personal...To me, it requires some bedside manners if one is to go forward and raise rents...This can be up there with firing people...very unpleasant but necessary..whoa

 

Dave ...thank you for contributing even more and inputting on #22's question...I am sure the argument to proceed either way will be valid...I do slightly lean toward favoring the tenant, but in the business world, that thinking would or could be considered defective...large complexes can keep it an arms length transaction and the smaller unit (s) make it more personal..

 

Sweet Michelle...I like your commenting and approach to the subject matter...One has to consider the "loss" to the owner as a real dynamic in play. Your "know your market" is a good flag to fly! Thank you M
6:40am • #29
840,980 Points 69 Featured Posts Outside Blog Called Shot Master

Hello Michael...most excellent point and here is a chance to really see this subject for what it is. In commercial arenas, it comes across as all business which is dollars and sense. No emotions, no second thoughts and everyone understands this going in and while they are there...In residential, the personal tug on ones beliefs kick-in and it is different for all as comments have indicated...thank you for your most excellent comment Michael

 

Dale...I imagined you on the witness stand giving testimony to this subject and I found no quarrel with your statement. In fact, it is presented as a fact of life in this business. As long as people know this going in is the only thought I have to add. Thank u Dale...
6:46am • #30
840,980 Points 69 Featured Posts Outside Blog Called Shot Master

Hello E.J....what a profound and meaningful all so relevant comment to be making. May I recommend that you post about this.
7:31am • #32
184,317 Points 6 Featured Posts Hit Router Attended Rain Camp

Yes, you are correct! Once properly staged, the photos and marketing generated from those efforts is usually top notch. So its importance reaches far beyond the psychical showing.
7:51am • #33
840,980 Points 69 Featured Posts Outside Blog Called Shot Master

Hello Vanessa...if you say so...so be it. However, I think you are correct
7:56am • #34
172,215 Points 11 Featured Posts Attended Rain Camp

Raising rent is a "necessary evil"----something I don't like to do to my tenants, but is a hard, cold fact of owning property. In a strong rental market, keeping tenants' rents the same year after year is just plain bad business. With that said, a 3%-5% increase is  usually the most I raise a rent UNLESS I really want a bad tenant to leave. (one that pays rent but is borderline annoying, not the cleanest, complains alot).

I do have a rule: keep my rents a "bit softer" than market value to try and keep tenants for 2-3 years but no longer
12:34pm • #35

Deborah, It is amazing how quickly you can lose your empathy for the tenant when they've been a constant thorn in your side.  As far as I am concerned, tenants that drive up your cost of doing business are not entitled to any sort of discount or incentive!
12:48pm • #36
840,980 Points 69 Featured Posts Outside Blog Called Shot Master

Hello Deborah...I want to thank you for your honesty and sharing a belief that most have, but would not state. Very refreshing this honesty of yours....The soft rule is a good one on my opinion too

 

Dave...thank you for visiting and supporting...Trying to keep this subject a business decision while the personal aspect of it pulls on you is difficult for some...all of us mean well and want the best possible outcome...whatever that is
3:31pm • #37

20 Most Recent Comments Displayed Show All


What does the graphic say?
Leave a response…

(optional)
Spam Prevention: