Tenants paying way below market

2cents

Thu, Dec 24 2015, 8:53 pm

mfb wrote:

Right, so while your mortgage hasn't gone up, the price of everything else has (inflation), and your expenses have gone up as your children have grown (more tuition, better clothing and extras for your teens, making simchas).

Again, if you can and are willing to keep the rent lower, great. But I don't think it's "inhumane" to raise rent ( with advance notice) to the going rate. What if the op's children are doing without because of this loss (or lack of gain, as you put it)?

mfb

Thu, Dec 24 2015, 10:07 pm

2cents wrote:

I agree to raising but doubling the amount sounds a bit much. Yes raise them every year $100 a month, but to raise $1000 a month sounds cruel to me!!!

amother

Forestgreen

Sat, Dec 26 2015, 12:46 pm

As a renter I would want to know as early as possible. If they have 6 months then they're not despearate and have time to look, to consider switching neighborhoods, finding new school/job...
If I would've had more notice on my apartment I would've made different choices. Instead I just grabbed an apartment that I shouldn't get stuck, but not an apartment I like.
The more notice the better. And I would say it straight out, like in that letter form someone wrote up. You only win in these situations of being extra nice! You never know maybe they have apartment that will come up now and they will leave before your lease is up and you can get a newlywed to rent it out.
Good Luck.

tryinghard

Sat, Dec 26 2015, 8:07 pm

mfb wrote:

I agree to raising but doubling the amount sounds a bit much. Yes raise them every year $100 a month, but to raise $1000 a month sounds cruel to me!!!

It's cruel with little or no time to find another option.
You feel so bad for the tenant - where's your compassion for OP? OP explained that her financial situation has changed. It is quite possible that she can't afford to lose out on $1000 a month or however much it is, any more than the tenant can afford to pay it!

Scrabble123

Sat, Dec 26 2015, 8:46 pm

MagentaYenta wrote:

I think it's kind of sad that the OP only gave two options and saw this as a simple black and white issue, when it really isn't. The responses on this thread show that there are other POVs and options rather than the two she proffered. I'm esp. concerned since she considered 'hinting' about the rent increase rather than addressing it truthfully.

Exactly. I think that the OP needs to be open and honest with her tenants. Also, a rent increase of $100/month is a large increase!

2cents

Sat, Dec 26 2015, 11:42 pm

Wait, where did the op say she's been raising them $100 every month? That IS a lot, and is not standard by any means, I don't think. I thought she's been raising them $100 every time their lease expired (say, every year or two years), but now wants to jump the price up to market value which is significantly more (ie, when they come to renew their lease, instead of the price being raised from, say, 1200/month to 1300, it will be raised to 2000/month).

pause

Sat, Dec 26 2015, 11:44 pm

2cents wrote:

I also thought she raised them by $100 one time only.

amother

Linen

Sun, Dec 27 2015, 2:29 am

tryinghard wrote:

She wanted to not give them any advance notice which is cruel. And stupid. It's a lot more likely shed find a higher paying tenant in time if she gives advance warning. Also when the hopeful tenants come to check out the place and they ask 'how are the landlords' you can be sure the tenants will say 'they might raise your rent by 1000 and not give you any advance notice'

Tablepoetry

Sun, Dec 27 2015, 2:40 am

mfb wrote:

You wrote two points above.

I am sorry, but I do not understand your first point. What do you mean, it's not a loss, just not a gain? Do you have any idea what it means to be a landlord?

People who invest in real estate risk a lot. She could have lost all her money if property rates went down. And what happens if one tenant just decides to stop paying, and doesn't move out? Do you know how complex and expensive it is to evict a tenant in most places?
What if the place needs major renovation to be rentable in another year? Who will pay for that? Who pays for wear and tear?

Some people here don't seem to understand that real estate involves a lot of risk and possible loss of money. People don't do that if they don't think they might gain money. It's a business.
Would you suggest that someone who bought a house for $500k sell it for $500k even if it's worth double now? What if the couple who wanted to buy were very nice people? Why shouldn't she sell at that price, since really, she's not losing, just not gaining?

I can't wrap my mind around this mindset. Also, if rent has gone up, presumably all rentals in the area have gone up. What if she wants to help her kids rent places? Should she be generous with her tenants at the expense of her kids?

As for your second point, of course I agree. Sometimes it's better to retain a good, reliable tenant that risk an unreliable tenant who might pay more. That's just being practical and making sure you actually earn money and don't lose it, which is what investments are all about.

amother

Aquamarine

Sun, Dec 27 2015, 7:20 am

I don't believe its a loss, its just not a gain. Presumably if you are renting for a lower price, that means you bought the house for a cheaper price than people buying now. So that means your mortgage is probably lower to.
If you have a good tenant that pays on time, and is reliable that is probably better than taking in someone that agrees to pay more but might not be able to!

There's also the factor of condition of apartment and renovations. Someone who is paying low rent has presumably been there awhile and it's probably in need of upgrades. Someone paying high rent will want an upgraded place that can cost mega bucks in order to get the higher rent.

tryinghard

Sun, Dec 27 2015, 10:52 am

amother wrote:

I don't believe its a loss, its just not a gain.

A lack of potential income works out to a loss in the end - if you need money, and have found a way to earn it, not taking that route is losing out on that money.

amother wrote:

If you have a good tenant that pays on time, and is reliable that is probably better than taking in someone that agrees to pay more but might not be able to!

OP is not asking whether or not to raise the rent. In her situation, she feels she should. The question is therefore not weighing whether the loss of income is worth retaining these tenants (whom she does not feel are ideal in any case), but how much notice to give them.

amother wrote:

There's also the factor of condition of apartment and renovations. Someone who is paying low rent has presumably been there awhile and it's probably in need of upgrades. Someone paying high rent will want an upgraded place that can cost mega bucks in order to get the higher rent.

That will be OP's problem - finding a new tenant at the price she wants to charge. She can upgrade if she so chooses (and probably make up the difference in a few months anyway). This has nothing to do with her question. She doesn't want to know IF she should, only when and how to notify the tenants.

I think many people here relate to the tenant, and are therefore not putting themselves in OP's place. Stop making her out to be an evil, money-grubbing landlord. She is just trying to do the best she can for her family.

That being said, OP, as many others have mentioned, it would really be more considerate to give them as much notice as possible.

MagentaYenta

Sun, Dec 27 2015, 5:28 pm

amother wrote:

My tenants are paying way below market level for their apartment

and

1- The family had 3 additions since moving in.

2- Theres lots of noise. My ceiling shakes when the kids are home.

3- My financial needs are very different. (Our married kids are not doing well financially, and we must help them).

The last time we renewed the lease, we raised a tiny bit ($100). Next time theyre up for renewal, I dont want that big a family that makes that much noise, and I can be getting way more rent.

Is the better approach to hint in advance, so theyre not surprised that the next rent increase will be much bigger than the previous one, so they have time to think of options, if they cant afford it, or should we wait until the lease expires?

I'm quoting the first post of the thread since folks seemed to have lost track of the points the OP first articulated.

Yes, the LLs financial position has changed, she wants full market value due to the financial circumstances of her children. I can't argue with that. It's her right. But she also indicates that the renters family has grown and she no longer wants to rent to a large family. (If the size of this family doesn't exceed occupancy rates she needs a way to force them out. Not nice, not legal but who is gonna rat her out since it's legal for her to double the rent.)

In the bolded part she indicates the question she wants answered. Many of the replies on this thread indicate that it would be kind and just to give this family as much advanced notice as possible in order to accommodate the renters. This doesn't and won't cost her a dime to do so.

I've said before I've been both a LL and a renter. There is nothing keeping her from having a conversation with her renters and telling them of her intentions. I don't understand why she would even consider 'hinting' about the increase rather than addressing the issue directly with the renters. How can advance notice possibly be a problem for her under the circumstances that she outlines? There is no downside to it.

2cents

Sun, Dec 27 2015, 7:47 pm

rgr wrote:

Its not the raise most ppl are objecting to, its the lack of notice. Why does the op not want to give notice? So it will be hard for the tenant to move, they will be forced to stay and pay the increase, and the op doesnt have to do the renovations/risk getting a new tenant who wont pay etc.

Reread the op, this is not what she is saying at all. Quite the opposite, she is looking forward to her current tenants leaving because of their noise and family size (I assume that water and possible gas is included in the rent, and that is affected by family size, as is wear and tear on the apartment). All of the posts that address the op's question are telling her to forewarn her tenant. I see no indication whatsoever that the op has an agenda not to- she clearly posted here for a reason.

The majority of the posts on this thread are on a tangent about whether or not the op should sacrifice the money or not, and whether it is humane to do so or not.