Who remembers my condo?!

[LoveTrains]

So I just heard from a neighbor that he rented his out for $1750/month. This is the condo which I have said is the bane of my existence and being a landlord is a PITA. Mine is currently rented for $1375 but the lease expires this summer and H and I were just debating how much to raise the rent. Real estate is BONKERS near Boston and apparently because we are walking distance to the train and in a downtown neighborhood the rents are through the roof. 

WWYD in my situation? I have a great renter who pays the rent on time, but she pays $1375. We were thinking about trying to raise the rent to $1450 and see what she says....but if two other units in my 4 unit building both just rented for $1750/month, am i shooting myself in the foot? 

[Roc A Bee]

I would increase it by $200 a month.

[LoveTrains]

I should also add that now I have to pay some stupid $18 month/trash fee to the city (started in March) and the mortgage is $1570 plus $169 condo fee/month.

[Balki.Bartokomous]

A good renter is hard to find. I'd meet her halfway and do $1500 if you think those other units are really going for that much.

Knowing her income, do you think it would still fit within her budget? If her current rent is a higher percentage of her income, just realize she might be more likely to move out or not pay on time if you increase it.

[scm1011]

I'd probably bump to $1500, but I find keeping a great renter to be worth sacrificing market rate. We're currently in a similar situation. I could EASILY rent the apartment downstairs for $200-300 more per month, but we have great tenants and its not worth the uncertainty/hassle to me. I realize that's not the most MM answer. 

[LoveTrains]

Jun 2, 2016 14:48:02 GMT -5 Balki.Bartokomous said:

A good renter is hard to find. I'd meet her halfway and do $1500 if you think those other units are really going for that much.

Knowing her income, do you think it would still fit within her budget? If her current rent is a higher percentage of her income, just realize she might be more likely to move out or not pay on time if you increase it.

I know for a fact the other units rented for those amounts. I don't see why my neighbor would lie plus I can see his listing on Craigslist. He emailed me out of the blue to tell me as a favor. 

It's a couple so I think they can probably afford $1500. I would have to go back to her app to see what their income is. They originally rented the apartment TWO years ago and then I didn't raise the rent last year on them. 

I have always sort of been of the mindset that a good tenant is worth perhaps not getting the most $$$$ for the unit. Not having to paint, clean, turn it over etc is worth time and $$ to me. I would need to pay a $500 broker fee to get a new tenant (I can't show it myself). 

[Balki.Bartokomous]

Jun 2, 2016 14:52:18 GMT -5 LoveTrains said:

Jun 2, 2016 14:48:02 GMT -5 Balki.Bartokomous said:

A good renter is hard to find. I'd meet her halfway and do $1500 if you think those other units are really going for that much.

Knowing her income, do you think it would still fit within her budget? If her current rent is a higher percentage of her income, just realize she might be more likely to move out or not pay on time if you increase it.

I know for a fact the other units rented for those amounts. I don't see why my neighbor would lie plus I can see his listing on Craigslist. He emailed me out of the blue to tell me as a favor. 

It's a couple so I think they can probably afford $1500. I would have to go back to her app to see what their income is. They originally rented the apartment TWO years ago and then I didn't raise the rent last year on them. 

I have always sort of been of the mindset that a good tenant is worth perhaps not getting the most $$$$ for the unit. Not having to paint, clean, turn it over etc is worth time and $$ to me. I would need to pay a $500 broker fee to get a new tenant (I can't show it myself). 

I just meant that you can't look at the asking price since what he rents it for could be different. I'd imagine that he would be the one inputting the actual rent in to zillow as well (if it shows that) since it's not like there would be public info as there is with a sale.

I'd just point out to them that they are still well below market rate. I mean, the math says to raise it to the full $1700 or so. If they leave you'd get $4500, less the $500 and whatever the cost of renos and vacancy are. So maybe you'd net $1k or so. How much could you use $1k? That's the question I think only you can decide. It's not a ton of money but not pennies either.

If it were me, I'd raise it to at least $1500 now. If they balk, you can always back down.

[LoveTrains]

Oh the listing is still up but he was flooded with applicants and she is coming to sign the lease tonight (my neighbor). So I'm fairly confident that the other units are actually renting for $1700+. Our area is insane.

[theblissisback]

Are you sure they plan on staying after the lease?

If so, I'd bump it to $1500.

If not, I'd bump it to $1750 and get new renters.

That doesn't seem that unreasonable to me. But I live in an expensive city and have gotten used to rental prices. My ideal place is a penthouse studio for $3k. Lol.

[dreamcrisp1]

Can you raise rent that much for them? You can only raise up to 2% here so I don't know.

If they can afford it, I'd raise a bit but if not, I wouldn't.

I'm biased because I get my apartment for a steal but my landlord is a dick so I deal with that.

[sfy]

I'd go to 1550-1575 after they renew (assuming they renew, if not, great, you can go to 1750). Because they haven't had an increase and because that's still ~200 below market, I'd feel good about doing that and if I were them, I'd feel good about accepting that. You just know they're probably like, "Can you believe our rent is still this low??"

And of course, I remember. I just thought about it when you made the PMI post. And this post is making me think about cubed's condo, too. But who knows, they could both end up being worth the hassle in the long run--fingers crossed!

[imojoebunny]

My DH is in the raise it $100 to $200 camp. I am in the market rent camp. We have 4 rental units, in booming areas, all, save one, are under market because of DH. I don't fight him, too much, but for the love of god or whatever, raise the rent when the sun shines on you. You can paint an apartment for the additional $4K a year, or pay the increase in property tax, which sends nails to renters here. We had 7 qualified applicants for our last rental, and we only held an open house for 1 hour. Maybe if we were at market, we would have had 2, and it would take a week, but all we need is 1.

[LoveTrains]

Jun 2, 2016 18:55:30 GMT -5 dreamcrisp1 said:

Can you raise rent that much for them? You can only raise up to 2% here so I don't know.

If they can afford it, I'd raise a bit but if not, I wouldn't.

I'm biased because I get my apartment for a steal but my landlord is a dick so I deal with that.

Yes, there is no regulation against raising rent. 2% is a ridiculously small increase. I mean, inflation can be higher than that in a year so that's crazy. 

[dreamcrisp1]

Jun 2, 2016 20:28:04 GMT -5 LoveTrains said:

Jun 2, 2016 18:55:30 GMT -5 dreamcrisp1 said:

Can you raise rent that much for them? You can only raise up to 2% here so I don't know.

If they can afford it, I'd raise a bit but if not, I wouldn't.

I'm biased because I get my apartment for a steal but my landlord is a dick so I deal with that.

Yes, there is no regulation against raising rent. 2% is a ridiculously small increase. I mean, inflation can be higher than that in a year so that's crazy. 

Agreed. But as a renter, I love it! It was max of 1.6% last year! It really does protect renters in this housing bubble we live in so its a good thing.

[vanillacourage]

I would tell your tenant what other units are renting for and offer her $1625/mo. I have a 2.5 or 3x rent amount income requirement on my properties and have so far had good luck swapping one tenant for another when they move on for their own reasons or due to rent increases from rising market costs. Last year my market was #3 in the country year over year and I've raised rents accordingly (I'm lucky that my properties are in great locations though.).

[awick14]

Jun 2, 2016 20:28:04 GMT -5 LoveTrains said:

Jun 2, 2016 18:55:30 GMT -5 dreamcrisp1 said:

Can you raise rent that much for them? You can only raise up to 2% here so I don't know.

If they can afford it, I'd raise a bit but if not, I wouldn't.

I'm biased because I get my apartment for a steal but my landlord is a dick so I deal with that.

Yes, there is no regulation against raising rent. 2% is a ridiculously small increase. I mean, inflation can be higher than that in a year so that's crazy. 

I agree that 2% is a ridiculous amount but that's also the law here. (Well it changes every year but that's what the 2016 % is.)

If you are not bound by that I would ask for $1500 and see what she says.

We rent our rental out for $1,200 and they will have lived here for 2 years when their lease expires this fall. Our friends are getting $1,400 for their space that slightly smaller then ours, and we could probably get $1,500 for ours. We are not planning on raising the rates if the stay with us, they are great renters and I couldn't imagine raising the rates for good tenants. (Well and we can really only raise the rent $24/month anyways.)

If they move out we will list the place for $1,500.

[ESF]

So as a renter paying way under market, I will offer this perspective. I'm not looking a gift horse in the mouth. My h and I really limit what we escalate up because we know we are paying a good 30-40% less than what she could charge. All sorts of small things, like when our toilet seat cracked or other minor repair issues, we just handle it. We've let a lot of things slide, like the fact that the gate on the fence has rotted so it can't be locked like it could be when we moved in, a not insignificant issue considering the break in rate in our neighborhood. When there are bigger things where we need the landlord to step up, like a broken heater, I meet with the repair person, not the landlord, and just send her the bill.

If our landlord started jacking up our rent closer to market, we'd start demanding full service.

I'm not saying don't raise the rent. You should, at least somewhat. But remember that people want what they pay for. If they generally aren't complaining and are pretty patient and cooperative, think about how much that's worth to you. You could be getting a good deal too, even though it may not seem like it.

[mbcdefg]

I think bumping it up to $1500 is absolutely fair. 

[sfy]

Wow, cubed! That's a big difference, but I do understand that nothing beats the peace of mind.

[drloretta]

I'd go to $1500

[dr.girlfriend]

Assuming the other two units are directly comparable in quality, etc. I would let your tenants know that they are great tenants and you'd like to keep them, but since the other two units are renting at x and you're operating at a loss regarding the cost of mortgage + fees you'll be raising the rent to ____, and I would make it under a $200 increase, maybe $150 - 175. I think explaining the sudden increase is fair, and if they don't like it they can move but it sounds like they won't get a better deal. Then, I would think about automatically raising about $50 a year until you get up to market price.

[aurora]

I think honesty is really the best policy. Tell them they're great tenants and you want to keep them, so you're only going to raise the rent to $1500 (maybe $1550?) instead of the $1750 that your neighbors are getting, but that you simply can't afford to keep losing as much per month as you have been with the low rent (given the current market). I think it's even OK to tell them how much per month you will still be losing at the new rate so they're prepared for another increase next year.

[tres3]

Have you thought about listing it for sale and finally dumping it now that that the market is hot?

[LoveTrains]

Jun 4, 2016 16:40:28 GMT -5 tres3 said:

Have you thought about listing it for sale and finally dumping it now that that the market is hot?

No because it would still be a loss from when I bought it. The value is in it as a long term rental I think. I think I could sell it for $200K but the rent is so high. It's weird. I bought it for $250ish snd owe $180ish on it.

[jena]

You're losing $364/mo... tell me how you're calculating the long term values of this?? In 5 years you'll have lost almost 22k on this deal.

They might be the most perfect tenants on the planet, but you can't subsidize them at your own expense forever. If you were breaking even at least I wouldn't raise the rent. If the rental market was bad I wouldn't raise the rent. But you could easily rent it at a rate to break even, so why not do it and keep 22k in your pocket?!?

[tres3]

Jun 4, 2016 21:01:18 GMT -5 LoveTrains said:

Jun 4, 2016 16:40:28 GMT -5 tres3 said:

Have you thought about listing it for sale and finally dumping it now that that the market is hot?

No because it would still be a loss from when I bought it. The value is in it as a long term rental I think. I think I could sell it for $200K but the rent is so high. It's weird. I bought it for $250ish snd owe $180ish on it.

But you are hemorrhaging $$$ every month to keep it. If you are subsidizing her $350/mo you would be better off to sell for $200k take the loss on your taxes and have an extra $350/mo in your wallet. 

If anything you should probably raise her rent to $1500 and tell her why-- that trash fees etc have gone up. 

[LoveTrains]

But then I have to realize the loss if I sell. I consider it part of our retirement savings at this point. I also think why sell now when the market rent will finally make this a net positive each month. We are now 11 years into the mortgage so gain more equity each month.