Reasonable rent increases.

[jerry]

I am about to increase the rent of a tenant who has been renting for 12 years. On the FEW occasions when I've raised the rent before she has always given me grief. Even with the new increase the rent is at least $200 below market.
Do any of you landlords have guidelines for rent increases, in terms of how much how often?

[tarheit]

It's easier to establish a practice of regular yearly increases. They are easier to stomach than a big one to 'catch up'. How much would depend on your local market. Of course you have to weight the cost of getting a new tenant vs. the loss in income (especially if the current tenant pays on time, etc.)

-Tim

[jerry]

Thanks for that input. I actually did go ahead with the increase and she didn't hassle me at all. I think she might be realizing she has a good deal.

Do you have any type of formula for rent increases? Do you use a percentage or check market rates?

[RealEstatePromos]

As long as you are not in a rent controlled area and have a month to month agreement, you can raise the rent to whatever you want with 30 days notice.

Since you can raise it to whatever you want, the next questions really is what will tenants tollerate and remain a tenant. There is no telling really but here is what I do.

If my properties are in a market without any vacany, I immediately move my rents to market no matter how big the increase is. I support the increase with a rental survey from the area which I give to them. If they move out, I find another tenant.

If there is a lot of vacany in the market, I raise rents on a big jump to about 10 to 15 % below market (again supported by a rental survey showing them they are still getting a good deal). From there on, I get them up to market slowly. If the CPI (consumer price index) is 3% I bump them 5% until I get them to market and then go back to increasing them annually by the CPI.