Raising the Rent is a Tightrope Walk

For any landlord, raising the rent is a difficult thing to do. Even if you are a heartless person, you have to walk a fine line and decide on an increase that will satisfy your needs, yet be acceptable to your tenant. If you don’t raise the rent enough, your business will suffer because there are, in many cases, consistently rising costs involved in doing what you do, like property taxes. On the other hand, if you raise the rent too much, your tenant is likely to leave, and if you are unable to rent the place soon, any benefit of a rent increase can evaporate very quickly.

In the following example, my tenants currently pay about $1350/month for a beautiful 2 bedroom place in a great neighborhood. I am sure this is under priced at this time, but I don’t believe raising it to it’s current value would be fair to them. I am therefore initiating a $95/month increase which I believe is already quite a blow to most people. I am only comfortable doing it because, as you will see, I gave them a price break over two years ago due to the deteriorating economic climate. Now, what if they decide to leave and I find out my perceptions are incorrect, and it takes me a month to find a new tenant. A one month vacancy would be an income loss of $1445 ( the new rent amount that I am proposing). It would take me over 15 months to recoup that loss via a $95/month gain in income, and that would be an utterly ridiculous result of a rent increase. It would be much much preferable to leave the rent stable and not have to find new tenants. So, we walk the fine line, and sometimes even express our sincere apologies to our tenants, because we don’t want them to move, and we know what it’s like ourselves when our costs go up, it’s difficult !

For your information, here’s an example of a rent increase notice I just sent out to some wonderful tenants that I would hate to loose. I start by reminding them of the price break they’ve had for quite a while.

Hi _____ & _____ ,

It’s been 2 years and 4 months since I first discounted your rent by $145/month, and one year since we discussed and raised it to $1350. This is still a full $95 less than ____ and ____ pay. I really love you guys, and hope that you can stay, but I need to bring your rent back up, at this time, to your original price of $1445. Hopefully your business is doing better and this won’t be a big problem for you.

I do imagine that if you two were to move I would probably be able to rent your place for close to $1600 a month. Rent prices in Portland have actually gone up a lot in the last two years.

I realize this is a pretty big increase, so it won’t take affect until August 1st in order for the two of you to have some time to think about it.

With apologies,

Mike

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2 Responses to Raising the Rent is a Tightrope Walk

  1. Stratus says:

    wow.. if only you were a landlord in London – actually I left a cute little studio in a really dodgy and inconvenient area because they decided to raise the rent.

    To be fair, I’d been there 6 years with no increase.. but I also worked hard to be a model tenant, in an area where model tenants and long-term/reliable tenants are hard to come by. So I’d have thought that that was at least worth a phone call, or an explanation, or a friendly letter, or even an opportunity to discuss.. but no… I got a stoic “you’re rent is being raised” notice.

    These guys had hundreds of properties though, so perhaps this kind of business gamble just doesn’t impact them in the same way as smaller landlords – and I suppose that also explains the terse notice.. when you have that many properties, I guess you don’t have time for the personal touch.

    I wrote to them, explained my circumstances and declined their offer to raise my rent with my notice – 2 weeks later they changed their mind, but I’d already found another place.

    • nozenji says:

      Thanks for sharing your story Lana, I think we’ve all been tenants at some point in our lives, so hopefully this blog can provide some benefit to a relationship that is often difficult. While I have taken to consulting my tenants about rent increases, it was a scary step. Nobody really wants to talk about how they are doing something that the other person is guaranteed to not like.
      I don’t know anything about how this works in England, but in Portland landlords know that a tenant really has no say in rent increases, so a landlord might say there’s no point in even discussing it. It’s too bad though your management company didn’t treat you more like a human being.
      However, one thing that tenants usually don’t consider is that in our world ( the US at least ), the costs of owning and managing a property are always going up. Property taxes inevitably rise, plumbers charge more, and utilities are always adjusting their rates upwards, so, even if a Landlord just wants to keep their income the same, rents have to rise.

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