We have some friends who have lived in the same two-bedroom apartment for 20 years. Up until a few years ago, the owner had never raised the rate. So the renters continued to pay the same amount ($900 per month) as they had every month since they moved in.
About three years ago, the landlord decided to raise the rent to $1,000 per month, so our friends asked whether he would repaint the apartment and replace the carpet. In the first 17 years of living there, they had never asked the landlord to repair or replace anything.
As a landlord, you always want good, stable tenants, and most long-term landlords I know are happy to take a little less in rent in order to have a great tenant who will stay in the property for a long time.
But there are very few tenants who expect that their rent will never increase, especially over the course of a decade. And yet, if you’re planning to raise the rent by 10 percent or more all at once, you need to look at what your lease says about rent increases.
Some leases will specify an annual rent increase of a certain percentage, say 2.5 percent or 3 percent or even more. Sometimes those rent increases are limited by city or state ordinances or “tenants’ rights” guidelines. There are some tenants who may move if you raise the rent substantially all at once, but most people are accustomed to a yearly increase.
The question for you is whether you want to lose this tenant and have to find another one. If you need to list the property or use a service to rent the property, you might have to pay a fee that could equal one month’s rent. For your purposes, you have to decide whether keeping this tenant is worthwhile or whether trying to find another is a better option for the two of you.
Ilyce Glink is the creator of an 18-part webinar+ebook series called “The Intentional Investor: How to Be Wildly Successful in Real Estate” as well as the author of many books on real estate. She also hosts the “Real Estate Minute” on her YouTube channel. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact them at thinkglink.com.