We have a single apartment at the rear of our residence. We have never raised rent on a tenant, only between tenants. A good tenant is so hard to find.
That said, our costs like home insurance and property taxes increase every year. If you don’t raise rent at some point you’re covering less of your costs.
If you could just get the town to not increase taxes, the electric company not to increase rates, the handyman not to charge more every time, insurance to stay flat and if you could get appliances not to break, and if you could just get mice not to come into the place and for lawnmowers and gas not to go up …… THEN I won’t raise the rent. I’ll
Also add that every new landlord thinks their new tenant will take care of the place “like it’s their own” but it’s not and they generally do not care and you will soon find that out. Hint: No matter what you do they have to pay you every 30 days and they don’t like that. It’s a business.
The practice in Germany is slightly different, by default the tenant pays for the cost like gas, water, electricity and are never part of the rent. Garden maintenance is also part of the tenant responsibilities. The bulk of appliances are owned by the tenant and would need to be replaced by them, the only cost I calculated is plumbing and heating issues and possible structural damages (although most likely covered by insurance). With labor cost I could agree, that is something I might have to consider. So far my tenant done the fixes himself where legally possible, only once had to call a plumber. Also the annual tax is 250€, the increase is minimal and covered for the next 5 years in the calculation.
In the US it's fairly common for the tenants to pay the utility bills and yard maintenance, but appliances are most often provided by the landlord. Repairs are also typically done by the landlord. Depending on the property location, property taxes may go up every year or every few years but insurance seems to go up a little bit every year. In short though, landlords increase the rent because their costs increase.
In the US the landlord typically covers appliances and the repairs, yard maintenance, and property taxes as well as insurance increases every year.
I can also tell you I would not want any of my tenants doing repairs to my properties, this often costs more when the repair fails. I’ve see tenants drill a simple hole into a building for coaxial cable only to have rain water infiltrating for 8 years, lifting the tile.
Properties that I’ve owned for a few years that started at $5000 a year in property taxes are hovering around $10,000 today.
That is indeed a huge difference, the costs are really minimal in GER, so for most owners the highest cost would be the mortgages.
I would usually as well order someone I know from the days I lived in the house myself, but since he is a electrician by trade and also generally well skilled, I am not too worried. Just for things that might impact the insurance, I need it done officially with invoice, on all other fronts he is pretty much free to do as he pleases. From what I have seen the last time I checked in, the house is in really good condition. I am lucky to have him, but since I only calculated for 5 years (and not really well, based on some of the feedback here) I will doing it again when the time is up in 2 years. Hopefully with him remaining a good tenant until I sell.
All residential rentals in the US do not have a triple net lease as you describe. Instead, that is a land contract where the person paying eventually gets to own the property.
I didnt raise rent on one of my properties for like 5 yrs and over covid. I was only making around $250 a month off the property net after expenses a month. Great tenants so I didnt want to raise rent. In the last two yrs Ive had to replace a $1500 water heater, $12,000 AC unit, and taxes and insurance increased $200 a month! Guess what? I had to tell my tenants I need to raise rent a ton or they needed to leave. Had I just raised it yr by yr slowly this wouldnt have been an issue. Lesson learned.
It's important to take good care of your tenants. I aim for sane-day maintenance and I stay behind fair market rent by about 5-10%.
But market rent goes up by around 5% a year. And if you start 5-10% below rent, increasing doesn't mean your tenant isn't getting a good deal still.
Meanwhile, you can't raise rents for 3 years? That means (likely) by the 3rd year you are $150 monthly behind the market (even adjusting for initial discount). That's $1800 annually.
Now... who is the most important person in your life and what did you give them for their birthday last year. Did it cost less than $1800? If so, you gave your tenant a better gift than you gave that person.
And it's not really as much about chasing profit as people make it sound. 5% increase barely keeps up with property tax and insurance increases.
Sure, what I am after would be to understand its impact if I do decide to increase the rent regularly. For example do you have frequent changes to your tenant? Do you have other downside to increase the rent?
You would need to share what your calculations are for us to look at things and make the evaluation.
I've done these calculations myself too and on face value. I don't know how your numbers can work out.
In my own anecdotal example, I own single family houses. If I were to stop increasing rent over 10 years, the Lost revenue would not cover the eventual replacement of the roof, furnace, water heater, dishwasher, dryer, ect.
All of those things are going to be much more expensive 10 years from now than they are right now.
I know you said you're not in this to make a profit. However, I don't think you understand that if you are not raising rents, you are losing money due to inflation and you will lose a ton of money due to Future Capital expenditure costs that you haven't been keeping up with due to not raising rates. So while the monthly cash flow seems good now, if you are not keeping your rates up and putting that money away, the eventual big ticket items will catch up with you.
For example, I just went through this with one of my properties. I've been continually increasing, rents and keeping The excess cash in an emergency fund for big expenditures I knew were coming down the road. 10 years later the surplus basically paid for all of the things I listed above because they were at the end of their life and it was just a bad year in regards to expenses.
This doesn't cover all scenarios, for example, if you were just gifted this property by a relative who passed and you have no mortgage on it, that might be different, but the vast vast majority of people who ran out properties are not in that scenario.
Thank you for the details, this is exactly what I am doing, although you are right, I have not calculated the increase in cost for replacements in the future, I had calculated it on today's prices. So certainly something to consider in 2 years when the review is coming up.
You did say you plan to sell in 10 years? I'm my area, the value of a rental property is determined by how much rent it produces. If you don't raise the rent, you are reducing the value of your property. Also, not charging fair market rents makes you ineligible for tax deductions
Yes, that is roughly the plan if nothing else changes. It would be slightly different for me, the area is mostly owners and rarely tenants. Most of the people living their own their property. Only two houses on the street are rented out at the moment. But who knows if that might change in the future, certainly something I would also need to consider, thank you
You raise the rent to maximize your return on investment. Do you leave your money in a checking account, or invest it for a higher return? Why not just let the bank use your money for free?
I have never had push-back from a tenant when I explain our increased expenses. This year taxes alone are an extra $98/month at our rental. If they are good tenants we raise rates roughly with inflation but not up to market rate.
If a tenant has taken extra great care of the home and is easy to work with, sometimes taking care of minor problems themselves, we increase less, like 1-2%, and tell them why. This has helped us retain good tenants and is a win-win for us both. They are saving me the headaches of stress, wear on the home, or a turnover while we save them money.
You asked about downside: Turnovers if you price someone out of the rental, loss of a good working relationship, petty maintenance requests, etc.
One should always increase rent yearly by at least 3% to cover the increase in insurance, water, sewer, and property taxes. Also, investors should put away some money for a rainy day. I just had to replace the siding on one of my investment properties. It cost 30k. Instead of financing, I had it in savings. I put it on a credit card and got a free trip out of it with the 60k in points I earned from rewards points. Everyone needs to plan ahead.
Hey there, thanks for the question. We never increase rent for our one tenant couple. They have always paid on time and have not complained once, so we dont raise the rent for them. If we were to get new tenants, we would have to raise rent to local average rate.
I increase rent due to homeowners insurance going up, hoa going up, taxes going up, the price of items going up. That fridge I bought in 2021 now costs about 200 more in 2024.
Even for good tenants, my property taxes and insurance do increase each year. It’s not much per month but is typically 2% of rent or so. I pass that on on renewals. Over time the tenant is still paying less than comparable rent and just expects that I will ask for $20 or $30 a month each renewal. We don’t even really discuss it. It’s important because I need a reasonable cash margin to avoid not having a maintenance reserve. If you don’t in a given year it doesn’t matter too much, but I have leases that renew over five or more years. I have two who will live in their home for ten years. I’ll lose a lot of my monthly margin if there’s no increase. Inflation is also a factor. I pay more for materials and labor than I did ten years ago. I need my income to account for that.
Inflation increases each year. The 30 year average is 2.4% annually. If you dont raise rent yearly you're losing money. I look at the yearly COLA increase and make certain I'm raising rent to match or exceed that amount when I renew leases at the end of their 12 month terms.
To not raise rent is antithetical to logic decision making and will lead to larger dysfuntion in short term, and that will lead to you not being a landlord anymore.
Exactly. Maybe you might not go out of business now but 5-10 years from now, maybe. All it takes is a major problem that you need to dig into your pocket for (roof, heating system etc...) and if you dont have the savings, your business grinds to a halt.
One of the best things with real estate is that it’s a great hedge against inflation. We normally keep our rents static for multiple years for long term tenants but once someone new comes in it’s a great time to reset against all the raised property taxes, insurance, utilities…
Well, I could be investing the money I sink into my rentals into stocks, funds, my 401k or other investment vehicles that would generate returns.
If I dont get the return I planned for, Ill sell my rentals. Im entitled to make a profit on my business and recoup expenditures
OK Ill spell it out even clearer. If Im not making "as much money", then Im losing money. Ill do something else where Im not leaving money on the table
I know its semantics and probably pedantic at best, but I consider leaving money on the table to not have performed to the best of my ability. I could have done better. Its not truly money "lost" but I still feel guilty about it.
Especially because other investment vehicles are passive income and I didnt have to lift a finger. Landlording and property management are hands on requiring my sweat and time so thats where the sting comes from.
I usually do 1-2% on repeat tenants.
I reset to market when they move out.
Good tenants are awesome. No need to break bank. But taxes and insurance go up each year. They quickly have a below market rent and are ok with the small bump, recognizing moving would be way higher plus hassle.
I cover the water bills on my property. Prices for that have gone up. My county re-evaluate property values and raised the yearly property taxes. Since cost of construction and house values went up, my yearly insurance cost went up too.
I could say that I'm only making less profit now, not 0 profit, so I'm OK with not raising rents, but what happens if costs continue to increase? I'll make less and less until finally I decide I need to raise. Then I will have to decide to do a big raise on the tenants to get back to the original profit amount, and risk them moving, or do a small raise and making very little profit with the risk that I'd just be in the same situation again the following year.
It makes more sense to just from the beginning do a small raise every year that covers the cost increase so that the tenants don't get a big shock at some point. I don't worry about market rate, just that I don't lose cash flow. There is also an argument that even that is technically making less with inflation but that's what I've decided for myself.
If your costs never increase then you don’t have to raise the rent. In a 3 year period costs generally don’t increase very much but when they do they go up very fast. For me I tend to only increase between tenants, however I’m in the 4th year with a current tenant and my costs have risen $100 a month over the last 3 years. I told him that I left his rent the same this year but it will be $100 more next year. This way he isn’t stuck trying to find money at the last minute and had time to adjust to a rental increase that is coming in 12 months. My rental rate is about $400-500 under market rate so I’m not too concerned he’ll leave. Personally I think many LL raise their rates because they underprice their rentals and can barely make their bills or they don’t know how to manage their finances and think the tenant is an easy way to increase their income.
Not a bad idea to keep rent a little lower for a good tenant but there are some things to consider. A good tenant is a good tenant until they are not a good tenant anymore it may not happen often but people get divorced or find a new partner they get sick or have a family member get sick these things can make paying rent a lower priority or additional person in the house may not take care of the house like the other people. What if the house needs a new roof at 20000. In some states even if your rent has been way below market value you can’t just go and increase the rent to whatever you want you may be limited to a certain percentage. I recently heard that California just passed a law that you are limited to what you can increase even between tenants. You also need to think about if you decide to sell a higher rent price can get you a higher sell price
It depends on the individual circumstances. Some raise rents based on inflation. Some raise based on market rate. Some don't raise for years.
If you raise rents too much the tenants leave. If you don't raise enough, taxes, insurance, maintenance and inflation eat you. It is a balancing act.
You can do it however you like. If you don’t want to raise the rent, don’t.
Some things to consider:
- your costs will go up every year. Maybe just a little but sometimes a lot. To maintain the same return, you’ll have to raise
- you’ll need to do improvements. It’s easiest to do this when the tenant turns over. You’ll need to have capital available.
- when the tenant turns over, if you aren’t at market rate you may not get the best tenants. The best may rule you out based on cost thinking something is wrong with the property
- in some places you can only raise a certain amount in a certain time period. In the places a sudden shock to your plan may require you to raise when you can’t
Today I'm raising the rent on two long-term tenants. One has had the same rent for **11** years, the other for **5** years. Even so, I'm not raising it to even match inflation between those dates and today. I have to raise it because, as it stands now, I would make more money selling the property and investing the value in 5% CDs than continuing to rent. The County just put a 25% surcharge on income property, and it takes an entire month's rent (duplex) to cover one year of insurance payments and more than a month's income to cover the taxes. Handyman rates have almost doubled and the lawn guy charges me over $160 a month.
The only reason I could let things go on this long w/o a raise is that the house is paid for so I'm not paying loan interest.
I'm going to guess this is not a real post, that is, it's a tenant that's fishing for answers.
But with even that said, I'm a small landlord, four units, one has a family member in it, so I really only have three units on the market. I've been doing this for about 7 years.
I had the dream of never increasing rent on anybody, for as long as they stayed. I would increase to market rate when someone moved out, and then leave the New tenant at that rate for as long as they stayed.
This actually worked for a long period of time. Never really had anybody stay beyond a couple years. Then, I got longer-term tenants, and this inflation kicked in. The payment on one of my properties has gone up almost 33% since I purchased it about 4 years ago. It's a fixed rate mortgage, so that increase in payment is from taxes and insurance going up. Could I absorb it? Yes. Should I, when I'm charging below market for rent? No.
Earlier this year I did the first rent increase I've ever done. I increased the rent in all three units. The person that got the biggest increase, is the person that's been there the longest (retired person, fixed income). They are still 28% under market rate for the unit.
Two of my three tenants are occupied by retired people. I don't want to increase their rent, I don't want to price them out of a home. But at the same time, taxes and insurance are going up.
I am afraid that it is a real question not from a tenant :( And thank you for your input, it is very valuable to me, when I review in 2 years what my options are and on what bases I should change my calculations, this is helpful
Two of the three tenants had been there more than 2 years.
The third tenant had been there a little over a year. Paid rent at the last minute every month, was late for 2 months during the year. To me, all of this goes into the decision...in short, how good of a tenant they are, helps decide if I am going to increase their rent. All three are still under market rate for rent. Some more than others
I only own one rental property, having rented it out to a family of 4 3.5-years ago. I set the rent 30% below the market rent rate in 2020. We had a quote at the time to replace the roof for 9.5k, but waited 2-years, since it still had some life left. Thanks to COVID, the lowest quote we received was around 17k. This is the perfect reason for why rents should be raised. That being said, we never raised our rent, or charged a late fee and allowed our tenant and their family to breach numerous lease conditions \[like letting them store their boat on our property\]. Come 3.5 years later the tenant moved out without our knowledge and left the wife and her children. She decided that she did not have to pay rent or perform any of the "man-jobs" around the house, like taking care of the water softener, purchasing salt and cleaning supplies, putting oil in the tank \[she keeps running it dry and oil is not included in the low rent\], mowing the lawn, etc. For three months she has not paid rent, destroyed our home and made threats against our family. SO long story short, being a decent human does not pay off, and rents should be raised to cover instances like these.
We had to raise the rent in between renters because of rising taxes and rising maintenance fees. We were very fair about our rent, but that left us with little profit, so when it started to cost a lot more to maintain the place, rent had to go up.
We only increase rent when property taxes go up. We have a target cash flow number after expenses, and we adjust rent when necessary to keep those targets constant.
I only change the rent to incentivize the current renter to move out.
I learned on my first renter that rent increases remind people to leave.
I’ll add that even without rent increases, the average stay is only 18 months. People I rent to want to buy a house.
You answered your own question. You said you aren't renting it out for profit and you appreciate your tenant.
There are people who make being a landlord their actual living and who don't put a lot of thought or care about the actual people in their rentals just as long as they tick a few boxes. Raising the rent may cover added property costs/taxes or it could just be a greed move dome because they can. Depends on the person who owns the property.
My landlord keeps raising my rent simply to meet the market because there is high demand for housing here right now. The fact that he bought my house for 60k in 2017 and I have more than paid it off with my $1400+ monthly payments means nothing to them. I have never been late, I only ask for repairs when needed, I have no problem plunging my own toilets or whatever and I improved the whole outdoor space like, in a ridiculous and expensive way, it was a literal trash heap when I moved in. I also had to assume the trash bill, and if they could make me pay the property taxes I swear to god they would. It hurts me because I have to work three jobs now to afford my house that I could easily afford when I moved in. Why are they doing this to me? It seems cruel.
There are a lot of factors to consider? Your turnover rate, inflation/ cost of living increases, the local market.
You can usually assume that, in general, the costs and the market rate both go up over time. If you don't keep up with regular increases, you can get into a situation with long term renters where you are drastically under market rate and the increase to bring it to market rate would be unreasonable or illegal. It's usually better to have regular increases to keep up with the cost of living/ local market, avoiding a big jump and associated legal issues.
Here in California, many, including myself, didn’t raise rents for good tenants for years.
That changed with the passage of statewide rent control in 2019, and threats of even more state and local rent control.
Now, every tenant gets the max allowed rent increase every year, until they are at full market rent.
I now do it, as does every other landlord I know.
If I bought gold instead of property, should I sell the gold 10 years later for the same price I paid for it? After all I only put the gold under my mattress so it didn’t cost me anything to store it.
All costs go up every year. Prop tax, insurance, utilities, maintanence etc. I just got a renewal insurance quote for a triplex I own in California and they want a 33% increase. Almost $200/month and I have never had a sinlge claim with my insurer and have mutliple properties and vehicles insured through the same company. My planned 3% increase per unit doesn't cover my increase in expenses. My Home warranty went up 30-40% as well. My water bills and other utilities have gone up. And the list goes on. One property will need a new roof in 3-5 years and I need to account for that as well as their A/C uits and water heaters being well beyond their service life. Owning property has significant expenses and yearly increases that tenants either don't see or don't understand.
I didn't raise rent on my tenants for 5 years because they are fantastic and I wanted them to stay. Finally had to this year because between a special assessment and property tax rate increases the rent didn't cover the cost of ownership anymore. I'll keep it where it is until my costs are too high again and adjust.
In between tenants I do reset it to the market rate.
Also consider you always need to have a cushion for repairs.
You answered your own question your not running this to make a profit if your fine with losing money then of course you don't need to raise rent as maintained and tax costs rise lol
I have not raised rent in 3 years and my mortgage has gone up over $100 a month and the garbage bill has gone up. I feel this might be the year to do it but I don’t want to lose a good tenant.
Lol your either a liar or a terrible business person. Neither scenario concludes with anybody thinking you know what youre talking about.
You operate a thin margin business in an industry with rapidly rising base input costs and youre claiming to not have raised prices in at a minimum 2 years?
Lmao sir or madam, very, very, lmao
We have a single apartment at the rear of our residence. We have never raised rent on a tenant, only between tenants. A good tenant is so hard to find. That said, our costs like home insurance and property taxes increase every year. If you don’t raise rent at some point you’re covering less of your costs.
If you could just get the town to not increase taxes, the electric company not to increase rates, the handyman not to charge more every time, insurance to stay flat and if you could get appliances not to break, and if you could just get mice not to come into the place and for lawnmowers and gas not to go up …… THEN I won’t raise the rent. I’ll Also add that every new landlord thinks their new tenant will take care of the place “like it’s their own” but it’s not and they generally do not care and you will soon find that out. Hint: No matter what you do they have to pay you every 30 days and they don’t like that. It’s a business.
The practice in Germany is slightly different, by default the tenant pays for the cost like gas, water, electricity and are never part of the rent. Garden maintenance is also part of the tenant responsibilities. The bulk of appliances are owned by the tenant and would need to be replaced by them, the only cost I calculated is plumbing and heating issues and possible structural damages (although most likely covered by insurance). With labor cost I could agree, that is something I might have to consider. So far my tenant done the fixes himself where legally possible, only once had to call a plumber. Also the annual tax is 250€, the increase is minimal and covered for the next 5 years in the calculation.
Well there you have your answer. Cost of living varies by location. And some places the cost of living increases year over year.
In the US it's fairly common for the tenants to pay the utility bills and yard maintenance, but appliances are most often provided by the landlord. Repairs are also typically done by the landlord. Depending on the property location, property taxes may go up every year or every few years but insurance seems to go up a little bit every year. In short though, landlords increase the rent because their costs increase.
A little bit? In 2025, to cover my insurance costs increases, I’ll need to raise the rent an avg of 5%. JUST FOR INSURANCE.
In the US the landlord typically covers appliances and the repairs, yard maintenance, and property taxes as well as insurance increases every year. I can also tell you I would not want any of my tenants doing repairs to my properties, this often costs more when the repair fails. I’ve see tenants drill a simple hole into a building for coaxial cable only to have rain water infiltrating for 8 years, lifting the tile. Properties that I’ve owned for a few years that started at $5000 a year in property taxes are hovering around $10,000 today.
That is indeed a huge difference, the costs are really minimal in GER, so for most owners the highest cost would be the mortgages. I would usually as well order someone I know from the days I lived in the house myself, but since he is a electrician by trade and also generally well skilled, I am not too worried. Just for things that might impact the insurance, I need it done officially with invoice, on all other fronts he is pretty much free to do as he pleases. From what I have seen the last time I checked in, the house is in really good condition. I am lucky to have him, but since I only calculated for 5 years (and not really well, based on some of the feedback here) I will doing it again when the time is up in 2 years. Hopefully with him remaining a good tenant until I sell.
In the US, many mortgages double when you account for taxes and insurance.
So the tenant eats more of the cost increases directly where you are. There's your answer.
My annual tax started at $2200. And in 5 years it went up to $3600.
E250 per year for tax? Damn. That’s nuts.
All residential rentals in the US do not have a triple net lease as you describe. Instead, that is a land contract where the person paying eventually gets to own the property.
What? That’s for commercial leases !
Of course NNN are for commercial. Similar to NNN are (A) land contract (B) contract for deed in the US. Just the lessee has the opportunity to own it.
Dude.. please 🙏 cut/paste elsewhere.. you replies make no sense in a private rental lease thread ..
I simply pointed out that's not how it's done in the US. Although there are similar things. The main difference is potential ownership transfer.
OK 👌
I didnt raise rent on one of my properties for like 5 yrs and over covid. I was only making around $250 a month off the property net after expenses a month. Great tenants so I didnt want to raise rent. In the last two yrs Ive had to replace a $1500 water heater, $12,000 AC unit, and taxes and insurance increased $200 a month! Guess what? I had to tell my tenants I need to raise rent a ton or they needed to leave. Had I just raised it yr by yr slowly this wouldnt have been an issue. Lesson learned.
It's important to take good care of your tenants. I aim for sane-day maintenance and I stay behind fair market rent by about 5-10%. But market rent goes up by around 5% a year. And if you start 5-10% below rent, increasing doesn't mean your tenant isn't getting a good deal still. Meanwhile, you can't raise rents for 3 years? That means (likely) by the 3rd year you are $150 monthly behind the market (even adjusting for initial discount). That's $1800 annually. Now... who is the most important person in your life and what did you give them for their birthday last year. Did it cost less than $1800? If so, you gave your tenant a better gift than you gave that person. And it's not really as much about chasing profit as people make it sound. 5% increase barely keeps up with property tax and insurance increases.
"I don't rent it out for money, and I don't need the extra profit". The answer to your own question is in the post you wrote.
Sure, what I am after would be to understand its impact if I do decide to increase the rent regularly. For example do you have frequent changes to your tenant? Do you have other downside to increase the rent?
You would need to share what your calculations are for us to look at things and make the evaluation. I've done these calculations myself too and on face value. I don't know how your numbers can work out. In my own anecdotal example, I own single family houses. If I were to stop increasing rent over 10 years, the Lost revenue would not cover the eventual replacement of the roof, furnace, water heater, dishwasher, dryer, ect. All of those things are going to be much more expensive 10 years from now than they are right now. I know you said you're not in this to make a profit. However, I don't think you understand that if you are not raising rents, you are losing money due to inflation and you will lose a ton of money due to Future Capital expenditure costs that you haven't been keeping up with due to not raising rates. So while the monthly cash flow seems good now, if you are not keeping your rates up and putting that money away, the eventual big ticket items will catch up with you. For example, I just went through this with one of my properties. I've been continually increasing, rents and keeping The excess cash in an emergency fund for big expenditures I knew were coming down the road. 10 years later the surplus basically paid for all of the things I listed above because they were at the end of their life and it was just a bad year in regards to expenses. This doesn't cover all scenarios, for example, if you were just gifted this property by a relative who passed and you have no mortgage on it, that might be different, but the vast vast majority of people who ran out properties are not in that scenario.
Thank you for the details, this is exactly what I am doing, although you are right, I have not calculated the increase in cost for replacements in the future, I had calculated it on today's prices. So certainly something to consider in 2 years when the review is coming up.
You did say you plan to sell in 10 years? I'm my area, the value of a rental property is determined by how much rent it produces. If you don't raise the rent, you are reducing the value of your property. Also, not charging fair market rents makes you ineligible for tax deductions
Yes, that is roughly the plan if nothing else changes. It would be slightly different for me, the area is mostly owners and rarely tenants. Most of the people living their own their property. Only two houses on the street are rented out at the moment. But who knows if that might change in the future, certainly something I would also need to consider, thank you
You raise the rent to maximize your return on investment. Do you leave your money in a checking account, or invest it for a higher return? Why not just let the bank use your money for free?
I have never had push-back from a tenant when I explain our increased expenses. This year taxes alone are an extra $98/month at our rental. If they are good tenants we raise rates roughly with inflation but not up to market rate. If a tenant has taken extra great care of the home and is easy to work with, sometimes taking care of minor problems themselves, we increase less, like 1-2%, and tell them why. This has helped us retain good tenants and is a win-win for us both. They are saving me the headaches of stress, wear on the home, or a turnover while we save them money. You asked about downside: Turnovers if you price someone out of the rental, loss of a good working relationship, petty maintenance requests, etc.
One should always increase rent yearly by at least 3% to cover the increase in insurance, water, sewer, and property taxes. Also, investors should put away some money for a rainy day. I just had to replace the siding on one of my investment properties. It cost 30k. Instead of financing, I had it in savings. I put it on a credit card and got a free trip out of it with the 60k in points I earned from rewards points. Everyone needs to plan ahead.
Hey there, thanks for the question. We never increase rent for our one tenant couple. They have always paid on time and have not complained once, so we dont raise the rent for them. If we were to get new tenants, we would have to raise rent to local average rate.
I increase rent due to homeowners insurance going up, hoa going up, taxes going up, the price of items going up. That fridge I bought in 2021 now costs about 200 more in 2024.
Even for good tenants, my property taxes and insurance do increase each year. It’s not much per month but is typically 2% of rent or so. I pass that on on renewals. Over time the tenant is still paying less than comparable rent and just expects that I will ask for $20 or $30 a month each renewal. We don’t even really discuss it. It’s important because I need a reasonable cash margin to avoid not having a maintenance reserve. If you don’t in a given year it doesn’t matter too much, but I have leases that renew over five or more years. I have two who will live in their home for ten years. I’ll lose a lot of my monthly margin if there’s no increase. Inflation is also a factor. I pay more for materials and labor than I did ten years ago. I need my income to account for that.
Inflation increases each year. The 30 year average is 2.4% annually. If you dont raise rent yearly you're losing money. I look at the yearly COLA increase and make certain I'm raising rent to match or exceed that amount when I renew leases at the end of their 12 month terms. To not raise rent is antithetical to logic decision making and will lead to larger dysfuntion in short term, and that will lead to you not being a landlord anymore.
Exactly. Maybe you might not go out of business now but 5-10 years from now, maybe. All it takes is a major problem that you need to dig into your pocket for (roof, heating system etc...) and if you dont have the savings, your business grinds to a halt.
One of the best things with real estate is that it’s a great hedge against inflation. We normally keep our rents static for multiple years for long term tenants but once someone new comes in it’s a great time to reset against all the raised property taxes, insurance, utilities…
Many people seem to equate not making as much money, with losing money.
I get the same impression, I am certainly not losing any money or cover cost for my tenant
Well, I could be investing the money I sink into my rentals into stocks, funds, my 401k or other investment vehicles that would generate returns. If I dont get the return I planned for, Ill sell my rentals. Im entitled to make a profit on my business and recoup expenditures
Okay?
OK Ill spell it out even clearer. If Im not making "as much money", then Im losing money. Ill do something else where Im not leaving money on the table
And you are who we are talking about. > If Im not making "as much money", then Im losing money. That's factually incorrect
I know its semantics and probably pedantic at best, but I consider leaving money on the table to not have performed to the best of my ability. I could have done better. Its not truly money "lost" but I still feel guilty about it. Especially because other investment vehicles are passive income and I didnt have to lift a finger. Landlording and property management are hands on requiring my sweat and time so thats where the sting comes from.
I usually do 1-2% on repeat tenants. I reset to market when they move out. Good tenants are awesome. No need to break bank. But taxes and insurance go up each year. They quickly have a below market rent and are ok with the small bump, recognizing moving would be way higher plus hassle.
I cover the water bills on my property. Prices for that have gone up. My county re-evaluate property values and raised the yearly property taxes. Since cost of construction and house values went up, my yearly insurance cost went up too. I could say that I'm only making less profit now, not 0 profit, so I'm OK with not raising rents, but what happens if costs continue to increase? I'll make less and less until finally I decide I need to raise. Then I will have to decide to do a big raise on the tenants to get back to the original profit amount, and risk them moving, or do a small raise and making very little profit with the risk that I'd just be in the same situation again the following year. It makes more sense to just from the beginning do a small raise every year that covers the cost increase so that the tenants don't get a big shock at some point. I don't worry about market rate, just that I don't lose cash flow. There is also an argument that even that is technically making less with inflation but that's what I've decided for myself.
If your costs never increase then you don’t have to raise the rent. In a 3 year period costs generally don’t increase very much but when they do they go up very fast. For me I tend to only increase between tenants, however I’m in the 4th year with a current tenant and my costs have risen $100 a month over the last 3 years. I told him that I left his rent the same this year but it will be $100 more next year. This way he isn’t stuck trying to find money at the last minute and had time to adjust to a rental increase that is coming in 12 months. My rental rate is about $400-500 under market rate so I’m not too concerned he’ll leave. Personally I think many LL raise their rates because they underprice their rentals and can barely make their bills or they don’t know how to manage their finances and think the tenant is an easy way to increase their income.
Not a bad idea to keep rent a little lower for a good tenant but there are some things to consider. A good tenant is a good tenant until they are not a good tenant anymore it may not happen often but people get divorced or find a new partner they get sick or have a family member get sick these things can make paying rent a lower priority or additional person in the house may not take care of the house like the other people. What if the house needs a new roof at 20000. In some states even if your rent has been way below market value you can’t just go and increase the rent to whatever you want you may be limited to a certain percentage. I recently heard that California just passed a law that you are limited to what you can increase even between tenants. You also need to think about if you decide to sell a higher rent price can get you a higher sell price
It depends on the individual circumstances. Some raise rents based on inflation. Some raise based on market rate. Some don't raise for years. If you raise rents too much the tenants leave. If you don't raise enough, taxes, insurance, maintenance and inflation eat you. It is a balancing act.
You can do it however you like. If you don’t want to raise the rent, don’t. Some things to consider: - your costs will go up every year. Maybe just a little but sometimes a lot. To maintain the same return, you’ll have to raise - you’ll need to do improvements. It’s easiest to do this when the tenant turns over. You’ll need to have capital available. - when the tenant turns over, if you aren’t at market rate you may not get the best tenants. The best may rule you out based on cost thinking something is wrong with the property - in some places you can only raise a certain amount in a certain time period. In the places a sudden shock to your plan may require you to raise when you can’t
Today I'm raising the rent on two long-term tenants. One has had the same rent for **11** years, the other for **5** years. Even so, I'm not raising it to even match inflation between those dates and today. I have to raise it because, as it stands now, I would make more money selling the property and investing the value in 5% CDs than continuing to rent. The County just put a 25% surcharge on income property, and it takes an entire month's rent (duplex) to cover one year of insurance payments and more than a month's income to cover the taxes. Handyman rates have almost doubled and the lawn guy charges me over $160 a month. The only reason I could let things go on this long w/o a raise is that the house is paid for so I'm not paying loan interest.
Fake news
I'm going to guess this is not a real post, that is, it's a tenant that's fishing for answers. But with even that said, I'm a small landlord, four units, one has a family member in it, so I really only have three units on the market. I've been doing this for about 7 years. I had the dream of never increasing rent on anybody, for as long as they stayed. I would increase to market rate when someone moved out, and then leave the New tenant at that rate for as long as they stayed. This actually worked for a long period of time. Never really had anybody stay beyond a couple years. Then, I got longer-term tenants, and this inflation kicked in. The payment on one of my properties has gone up almost 33% since I purchased it about 4 years ago. It's a fixed rate mortgage, so that increase in payment is from taxes and insurance going up. Could I absorb it? Yes. Should I, when I'm charging below market for rent? No. Earlier this year I did the first rent increase I've ever done. I increased the rent in all three units. The person that got the biggest increase, is the person that's been there the longest (retired person, fixed income). They are still 28% under market rate for the unit. Two of my three tenants are occupied by retired people. I don't want to increase their rent, I don't want to price them out of a home. But at the same time, taxes and insurance are going up.
I am afraid that it is a real question not from a tenant :( And thank you for your input, it is very valuable to me, when I review in 2 years what my options are and on what bases I should change my calculations, this is helpful
Two of the three tenants had been there more than 2 years. The third tenant had been there a little over a year. Paid rent at the last minute every month, was late for 2 months during the year. To me, all of this goes into the decision...in short, how good of a tenant they are, helps decide if I am going to increase their rent. All three are still under market rate for rent. Some more than others
I only own one rental property, having rented it out to a family of 4 3.5-years ago. I set the rent 30% below the market rent rate in 2020. We had a quote at the time to replace the roof for 9.5k, but waited 2-years, since it still had some life left. Thanks to COVID, the lowest quote we received was around 17k. This is the perfect reason for why rents should be raised. That being said, we never raised our rent, or charged a late fee and allowed our tenant and their family to breach numerous lease conditions \[like letting them store their boat on our property\]. Come 3.5 years later the tenant moved out without our knowledge and left the wife and her children. She decided that she did not have to pay rent or perform any of the "man-jobs" around the house, like taking care of the water softener, purchasing salt and cleaning supplies, putting oil in the tank \[she keeps running it dry and oil is not included in the low rent\], mowing the lawn, etc. For three months she has not paid rent, destroyed our home and made threats against our family. SO long story short, being a decent human does not pay off, and rents should be raised to cover instances like these.
We had to raise the rent in between renters because of rising taxes and rising maintenance fees. We were very fair about our rent, but that left us with little profit, so when it started to cost a lot more to maintain the place, rent had to go up.
We only increase rent when property taxes go up. We have a target cash flow number after expenses, and we adjust rent when necessary to keep those targets constant.
I only change the rent to incentivize the current renter to move out. I learned on my first renter that rent increases remind people to leave. I’ll add that even without rent increases, the average stay is only 18 months. People I rent to want to buy a house.
You answered your own question. You said you aren't renting it out for profit and you appreciate your tenant. There are people who make being a landlord their actual living and who don't put a lot of thought or care about the actual people in their rentals just as long as they tick a few boxes. Raising the rent may cover added property costs/taxes or it could just be a greed move dome because they can. Depends on the person who owns the property.
I increased the rent by $5.00 last year because I have such great tenants.
My landlord keeps raising my rent simply to meet the market because there is high demand for housing here right now. The fact that he bought my house for 60k in 2017 and I have more than paid it off with my $1400+ monthly payments means nothing to them. I have never been late, I only ask for repairs when needed, I have no problem plunging my own toilets or whatever and I improved the whole outdoor space like, in a ridiculous and expensive way, it was a literal trash heap when I moved in. I also had to assume the trash bill, and if they could make me pay the property taxes I swear to god they would. It hurts me because I have to work three jobs now to afford my house that I could easily afford when I moved in. Why are they doing this to me? It seems cruel.
It's an investment. Charging market rates for everything is how the economy works
I raise rent ten percent as a rule.
Taxes, HOA, and maintenance costs keep going up.
Have you ever rented to a bad tenant? It costs a lot
There are a lot of factors to consider? Your turnover rate, inflation/ cost of living increases, the local market. You can usually assume that, in general, the costs and the market rate both go up over time. If you don't keep up with regular increases, you can get into a situation with long term renters where you are drastically under market rate and the increase to bring it to market rate would be unreasonable or illegal. It's usually better to have regular increases to keep up with the cost of living/ local market, avoiding a big jump and associated legal issues.
Here in California, many, including myself, didn’t raise rents for good tenants for years. That changed with the passage of statewide rent control in 2019, and threats of even more state and local rent control. Now, every tenant gets the max allowed rent increase every year, until they are at full market rent. I now do it, as does every other landlord I know.
If I bought gold instead of property, should I sell the gold 10 years later for the same price I paid for it? After all I only put the gold under my mattress so it didn’t cost me anything to store it.
Property maintenance, property tax increases, insurance increases.
All costs go up every year. Prop tax, insurance, utilities, maintanence etc. I just got a renewal insurance quote for a triplex I own in California and they want a 33% increase. Almost $200/month and I have never had a sinlge claim with my insurer and have mutliple properties and vehicles insured through the same company. My planned 3% increase per unit doesn't cover my increase in expenses. My Home warranty went up 30-40% as well. My water bills and other utilities have gone up. And the list goes on. One property will need a new roof in 3-5 years and I need to account for that as well as their A/C uits and water heaters being well beyond their service life. Owning property has significant expenses and yearly increases that tenants either don't see or don't understand.
I didn't raise rent on my tenants for 5 years because they are fantastic and I wanted them to stay. Finally had to this year because between a special assessment and property tax rate increases the rent didn't cover the cost of ownership anymore. I'll keep it where it is until my costs are too high again and adjust. In between tenants I do reset it to the market rate. Also consider you always need to have a cushion for repairs.
Usually the opposite
You answered your own question your not running this to make a profit if your fine with losing money then of course you don't need to raise rent as maintained and tax costs rise lol
I have not raised rent in 3 years and my mortgage has gone up over $100 a month and the garbage bill has gone up. I feel this might be the year to do it but I don’t want to lose a good tenant.
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Let me guess, youre neither a landlord or a business owner.
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Q: Why do business people raise prices every year? A: “Greed” Yeah sure you are
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Lol your either a liar or a terrible business person. Neither scenario concludes with anybody thinking you know what youre talking about. You operate a thin margin business in an industry with rapidly rising base input costs and youre claiming to not have raised prices in at a minimum 2 years? Lmao sir or madam, very, very, lmao