Dallas-Fort Worth Real Estate Investor Club

Increasing rent on a loyal tenant

  • 23 Apr 2017 8:14 PM
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    Message # 4771317
    Cynthia

    Hello all, 

    I've been renting homes in Arlington for two years now. I see rents are going up.  I have a loyal tenant that's been renting a duplex in Arlington for 4 years. It's a 3-2 , 1000 square feet.  The rent hasn't changed in 4 years.  I bought it last year and kept the rent the same.   I would like to increase the rent.   What percent increase is reasonable in today's marketplace for a loyal tenant?
  • 24 Apr 2017 6:34 AM
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    Reply # 4771871 on 4771317
    Robin Carriger (Administrator)

    It's less about the percent increase and more about what the market will bear.  We typically keep tenants who have been with us for a while under the rent we could charge a brand new tenant.  The discount off of current market rent for someone who's rented from us for a while is somewhat subjective, but the goal is to keep it low enough that they won't be able to find a better place to rent in the area for what we're charging them while not penalizing ourselves with a rent that's too far below market.  For us, the discount usually turns out to be somewhere between $50.00 to $100.00 per month.

    Thanks,

    Robin

    Last modified: 24 Apr 2017 6:35 AM | Robin Carriger (Administrator)
  • 24 Apr 2017 8:44 AM
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    Reply # 4771994 on 4771317
    Jesus Galaviz

    I would recommend raising the rent within the range Robin indicated.  Four years is a long time to be at the same rate, especially in an appreciating market like DFW, especially in a 3+ bedroom unit.

    Also, it is generally a good strategy to buy a property based on current rents (and other relevant factors) and then raise the rent to market levels.  You can offer your "loyal tenants" 60-90 days notice of a rent increase if you wanted to be particularly considerate of them.
  • 24 Apr 2017 2:30 PM
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    Reply # 4773701 on 4771317
    Bruce Nelson
    Good advice so far.  I think it depends on what current rent is compared to going rate in your area.  If you are talking about doubling the rent, your loyal tenant may not be able to afford the jump.  I am sure that in this climate you will not have much trouble finding a new tenant at a fair market rate but if loyal tenant is also taking care of the property, that is worth factoring into the analysis.
  • 24 Apr 2017 5:29 PM
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    Reply # 4777291 on 4771317
    Cynthia



    Those are all very good points.  I don't have a comparable analysis from a realtor, but looking at several rental websites,  the rent the tenant pays now is $200-$300 below the market.  I think if I ask first for $100 more I'm still being very reasonable, , it's 10%.  Any additional thoughts?
  • 25 Apr 2017 5:47 AM
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    Reply # 4777882 on 4771317
    Jesus Galaviz

    They will be more agreeable to it if you call and explain to them before sending the notice.
  • 26 Apr 2017 11:53 AM
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    Reply # 4783708 on 4777882
    Neil Aggarwal
    Jesus Galaviz wrote:

    They will be more agreeable to it if you call and explain to them before sending the notice.

    Its about time someone took into consideration that the tenant needs to feel like they are not being treated as just a number.  A good tenant is golden and should be treated as such.

    Don't forget, turnover is very costly. Also, getting a bad tenant will give you more headaches and problems.  That may outweigh the value of any potential rent increase.

    You have to tread a fine line.  You should try to keep the tenant happy while also trying to maximize your business.

    I hope this helps.  Let us know the outcome.
      Neil Aggarwal
      NSA Partners, Ltd.

    Last modified: 26 Apr 2017 11:54 AM | Neil Aggarwal
  • 27 Apr 2017 6:56 AM
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    Reply # 4786822 on 4771317
    Cynthia

    I certainly agree that a phone call makes a big difference and it allows dialogue as apposed to an email to deliver the message.    That's what I did, I called, we discussed it, he said he was thinking of buying a house next year and agreed to $100 rent increase in 45 days.  

    Thank you all for your great comments
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