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- I own two rental properties, and I have only raised the rent by $40 on one of my properties in the last 10 years.
- Common wisdom says landlords should raise the rent whenever possible, but I almost never do. Keeping quality renters helps me save time and energy, as well as the stress involved in finding new renters.
- If you're a landlord who is wondering if they should raise the rent, make sure to think of all the costs involved in turnover, including the loss of your most important asset — time.
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My husband and I bought our first rental property — a small brick ranch home — in the suburbs of Indianapolis in 2007. The next year, in 2008, we turned our first "starter home" into a second rental property so we could move into a larger home.
It's been more than 10 years since then, and one of our properties has gone through several different sets of renters, most of whom have been wonderful tenants. But the other property (our first home) has only had two different sets of renters during that entire time, the second of which have lived in my property for 10 years at this point!
While we have raised the rent to just below market rates each time someone has moved out of the first home we purchased, we have only raised the rent on our long-term renters once, and that was a small amount to cover the increased cost of taxes and insurance (around $40 per month).
Funny though, I always read about landlords saying they raise the rent at every opportunity. They claim you should always increase your profits as much as possible, and that it's crazy to let renters stay in your property for less than market value.
I disagree with that premise, which is why I rent both of our properties for less than I could. There are plenty of reasons why, and yes, I am perfectly happy with my decision.
Excellent renters are hard to find
Most landlords would probably agree that excellent renters are worth their weight in gold but sometimes hard to find. We have had a good experience with all of our renters except for one family, who somehow managed to do thousands in damage to one of our properties during their brief stay there. By the time they moved out, we had to replace flooring, kitchen counters, all the doors in the house and a huge (and expensive!) picture window.
Knowing that one renter could potentially do thousands in damage makes me leery about losing renters who take excellent care of my property as if it was their own. At the moment, both families we rent to pay on time, don't break things, and generally make our lives easy. Since we don't use a property manager, I value them greatly.
Keeping quality renters lets me avoid turnover
Any time someone moves out of a rental property, you usually lose a month of rent while you clean and paint. This is also a time when you might find renter damage you want to fix, or when you might spend time and energy taking care of upgrades you should probably make.
But when renters stay put, you don't have to do, well, anything other than take care of basic maintenance. I may not have extracted every dollar in rent I could have over the last decade, but I haven't had a vacant property in years.
I'm also skeptical that raising the rent would have raised my net profits that much over time. When you spread the cost of rent over 12 months for the months of payments I haven't lost, it's probably more or equal to the amount of money I could have raised the rent by. As an example, raising the rent $83 per month would give me $1,000 more in profit, yet any number of situations (damage, vacancies, nonpayment, etc.) could easily cost me a lot more than that.
Time is money
Losing a good renter would also cause me to lose something I find very valuable right now — my own time and energy. I shudder at the thought of our renters moving because they couldn't afford a small rent increase, leaving me to spend weeks cleaning and painting and vetting new renters. Leaving the rent where it's at is much more convenient for me since it lets me avoid spending any extra time or energy on my side business.
At the end of the day, I would much rather spend more time working (I'm self-employed), and I definitely prefer spending my weekends with family instead of cleaning and running background checks. In summary, keeping rents low allows me to generate a fairly passive income stream since I spend hardly any time dealing with the properties I own.
Some landlords are probably shaking their heads at me right now, and that's perfectly fine with me. I know what my time and energy are worth, and I am happy with the way things are.
As a side note, I know my renters never lose sleep wondering if I am going to raise their rent to something they cannot afford. I don't mind taking a slight hit on profits in order to save everyone involved some time, energy, and stress.
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