When Does the Dream Become a NightMare? Rent Increases!!!!

I am in a HOT rental market. My rent for new move-ins has increased from $620 a year ago $725 now. Everyone is increasing. I am still lower than my competitors.

Occupancies are high, too. Staying in the mid to high 90% range with waiting lists everywhere, including me!!

The owner wants to increase rents, of course. We started out 2014 with $25 increases. Now, some of them are going up $60 - $70 per month starting in July. These tenants have been here the longest, others are not quite that much.

This will still put them about $30-$40 below what I am leasing them at. I am concerned about the impact it will have on retention.

Any suggestions to help me cushion the blow? I'm going to need a script for this one!

Sandy, I normally talk to the owners to get a feel of why the increase. I try to keep old renters at a stable rent, that are paying on time and are good tenants, and increase the rent before the new tenants come in. I always tried to reward those folks that renewed by not increasing thier rents. When I crunched the numbers it was cheaper and we came out ahead.

Now all of that being said, my favorite place for information is: www.nolo.com/legal-encyclopedia/free-boo...book/chapter3-8.html

A few quick talking points for your residents with concerns about their rent increases:
1. The value of where they currently live - excellent service, quality housing, amenities, making their home in a COMMUNITY.
2. The cost of moving, especially if you are still priced below market. Point out what they are getting for their money, in comparison to your competition.
3. The increase in cost of doing business, especially if you have done any renovations/improvements/capital expenses. Taxes, insurance, interest rates, labor costs, common area maintenance and utilities... as those increase, so do the rents. Your residents aren't going to care much about these, but they are valid reasons for increases.

I just recently increased rents across the board at three of our communities, anywhere from $25 to $40 per month. The other two communities will also take increases a few months down the road. We have had a little, but not much, push-back from the residents. An open and honest conversation goes a long way, especially if on-site management is sincere in their understanding of the reasons behind the increase.

I think you are in an excellent position for implementing rent increases. It sounds like you know your market and what rent rate it will bear, plus you have a waiting list. The only way Ownership can gain revenue is with rent increases if there are no opportunities for ancillary income (garage rent, pet rent, RUBS, etc.) If your Product is similar to others in your competitive market, then you are in a position to seize the increase. What I see many times is an inferior product that asks for $40 increases and then experience a downward spiral when there is a rebellion. However, even in these instances, if there are going to be some nice capital improvements that really benefit the Resident, then they understand and accept a rent increase. It starts with you - your Buy-In and your confidence that the property is "worth" the increase.

Consider offering them 3 levels of increasing.
Offer them a month to month rate.
Offer them a lower 6 month rate.
Offer them a lower 12 month rate.
Say 60, 50, 40
Because my residents know they are getting an increase every 12 months, they come in ahead of time wanting to sign a 12 month lease quick before the new move-in rents go up again. Never increase them to within $20 or so of what new people coming in are paying - that would be offensive and create more animosity.
Consider what your competition is also doing. If they are increasing too, the news gets around and it is more easily accepted.
Maintain your property well and let them see you outside checking out what's going on. When they see that you care, it helps alot.