I know I know, always raise the rent.

But:

Two year tenant, coming up on third renewal. Old lady, retired. Fixed income. Excellent resident: very pleasant, takes excellent care of her place, always pays her rent two weeks early. Careful with her finances: you can tell by her water usage, her power usage, etc. Installed a dog fence (with our permission) and a dog door, so she's in it for long term.

She knitted me an afghan :)

If she moved, I could probably raise the rent $25. It's a tiny place, with an awkward layout. Cute, though. We fixed it up as best we could before she moved in!

I wouldn't. Not for $25. It could take you 2 months to fill then you're at a -$ rent increase.

I save my rent raises for pitas, late payers, and longer term tenants who are drastically under market.

I wouldn't raise the rent either. I'm sure there is someone else or property that you could though.

Like NE, I raise the rent for PITAs, and people who make more work for me. I like to think of it as getting the amount of rent that makes it worthwhile to put up with them. I don't care if they go or stay for the price. But long term good tenants are worth a lot to me. $300 a year is not going to make or break me, but it might to my tenant.

Tenants who pay two weeks early, take excellent care of the place and are in there for the long haul are often as rare as hens teeth. Don't raise her rent, especially since she is on a fixed income. It's not worth losing her over this.

I have a couple who are on a fixed income; had a disabled daughter living with them who moved out and they lost her disability funds that was helping to pay the rent. I lowered their rent by $100 a month just to keep them in this house; they take such good care of the place.

WMH, you already know my suggestion - Ask THEM how much?

Let them know: "Rents really need to go up this year to cover ever-increasing expenses. However since you have been excellent residents, we want very much to work within your budget. So please let us know what's the most rent increase you can handle at this time and we will try our best to work with you if it's reasonable."

Whatever amount they say will be a win-win for you, since you don't plan on going up at all. And they will be okay since they played a part in the decision making process.

One consideration I make when deciding whether to raise the rent is "what will be my net, after income tax gain".

We are heavily taxed. Roughly for every dollar a tenant pays me, I only keep 60 cents after deducting expenses.

Glad to see all the responses. Jeffrey, you are right, I should ask...maybe I will ;)

Jeffrey's approach has worked for me numerous times. I send it on company letterhead and it's the "business" raising the rent. I've never had them send back $0.

I just had a $25 self raise on a $485 monthly rent. Previous to that, I had a $25 self raise on a $250 monthly storage unit.

I again, save it for the folks that I listed earlier.

I do have 2 tenants that have the same rental rate in a duplex that I want to send the letters to. I'm not sure how it will work out. If they discuss the letters amongst each other. If they attempt mutiny, or pull each other's numbers up. Maybe they don't discuss it and both send back different amounts.

One thing I do do is state a high number that it may be raised to like an additional $100 on a $600 unit. I then tell them that we aren't like other landlords and force them to pay it. Then I ask them for their number.

Most people are afraid to lowball.

I also tell them that if we don't hear from them by the end of the 60 day notice, that we will assume they are ok with the $100 (or whatever) and the new increase will be effective on __/__/2016.

It will cost her a lot of money to move, and she surely doesnt want the hassle. She isn't going to move out over $25 per month.

...She isn't going to move out over $25 per month....

to lower income, fixed income tenants, $25 is a HUGE amount.

Dad was complaining last weekend the his pension was not going up even though his expenses are.

I'd stop by, check on everything, make sure all is in working order. Then say, Mrs Jones, I'm sure your familiar with the fact that all the costs are going up and our costs have gone up as well. Unfortunately, we do need to raise your rent to keep up with expenses. Your current rent is $XXX. What increase can your budget sustain?

In this instance, we both decided not to raise the rent.

While the market might bear the $25, the pool of potential residents who would qualify for the total rent is quite small.

Not.

Find another way to make a buck

Turn overs cost you money..........but you need to adjust the rent. Do a small token increase of $5. That way you can honestly say, all tenants got an increase in year three.

So let me understand WMH. When you say "we both decided", you did not actually ask her the way I suggested you ask, did you (even though you have heard me teach the idea several times)?

Most people who do not believe the idea will work have actually not tried using the simple strategy, and saying it the way I suggest it. It's really no way the idea can backfire on you and works the vast majority of the time.

Jeffrey, you are right - it was DH and me who decided not to raise the rent, not the resident and me.

We still have 45 days to decide, and just today I asked her if she actually wanted to renew. Her response was very enthusiastic, she does want to stay, she loves the place.

So now we are going back and forth about raising the rent again!

Hey she knitted you an afghan, probably cost her

$25 in yarn. She's a fixed income, so unless she

has a large nest egg you know about or your cost

in taxes and insurance has gone up and it is dipping

into your pocket, I would not raise the rent.

The ones that don't cause any problems you need to keep

anyway you can.

This thread is a keeper.

Thank you, Jeffrey for this invaluable site.

I really like Jeffrey's means to address the raising rents. Great strategy!!

With my long term tenants I generally don't raise rents. In my MO market a typical vacancy is around 2 months. That's vacancy loss of $1000. My two houses where I'm below market are $75 below each. Staying below market and providing attentive customer service & timely repairs means 5 year (+) tenancies with 0 vacancy losses.

Additionally these tenants pay on time & in full & promptly report issues so I can upkeep properties.

To me this is a worthwhile trade off. If either property were to become vacant I'd then go to market rent. My payments are low & stable & both properties cash flow.

They can't find a similar quality property for the same money & I'd rather not chase them into a lesser property by raising the rent.

It's not about courage to raise rents

as much as it is about collecting Money and Greed.

Again, leave the old lady alone and find another way

to make a buck.

again, talking about lower income / fixed income people here.

rent is $700 per month. raise it $10 which is I believe 1.44% to $710. At the end of year one you've gotten an extra $120 in your pocket. Year two another $10 and you've now gotten an extra $240 for the year. go again year three at $10 and cha'chig ... an extra $360. For those 3 years you've now gotten yourself an extra $720 - about a month's rent.

If you had lost a good tenant because of the rental increases, there goes your $720 due to some type turn over and vacancy costs.

Anyone who thinks low income folks don't resent and won't move over $10 have never dealt with them. Yes, it's all priorities. they may smoke and have more beer cans in the recycle bin than you thought possible. More cable channels than anyone could ever possibly watch. A fancy phone, expensive sneakers, nails done at the salon ... but they are driving a junker car with no insurance and they are keeping the rent down as low as they can. it's the psychological thought of "landlord's raising the rent" - not the actual dollars and cents.

And to those who say it costs too much to move - no it doesn't. a couple friends with a pick up truck or possibly two on a Saturday is all it takes. drive through an apartment complex or center city at month end. Furniture galore at the curbs.

Nicole, this lady won't move over $10, but from another perspective, $120 is one extra dinner a year at our local favorite restaurant. For her, $10 is one-third of her monthly water bill.

We are back to: "not raising the rent on her." We have and will on some others when the time comes though.

When we went into business we decided we would not give good tenants any reason to move, thus we don't usually raise rents. I value the long term relationships that have developed, and after a few years we work together very well. I have almost zero vacancy, a list of people waiting for units and former tenants who move back and want to rent from us. We do get aggressive on increases in between tenants. That has worked for us and our bottom line is good.

Can you cite the statute that says that, Lisa? I've never heard that before.

Just do a search on renting below market value and you'll find all sorts of info.

I don't know 100% that the IRS defines fair market value. But if you read varies court rulings you find they pretty much agree on 80% as the magic number if you can show how renting it 20% below market value benefits you in some way.

I have a house now I'm renting for too far below value that I can't claim as a rental and another that is rented for only 80%. The second one I just had a payment problem with (these are friends). I had to make it clear that I can't work with them beyond a month because in all other cases they would have been serviced a pay or quit notice and asked to move. I can't very well justify their extra low rent as a benefit to me if I'm not being paid.

Interesting because many landlords actually DON'T make a paper profit. And I know many where rent covers the mortgage and that's about it.

I know that when you rent to FAMILY it has to be rented at FMV but I never heard that about other people.

What do they do about Rent Controlled spaces? Those places are often not rented at FMV?