Raising The Rent Pt. 2

The first step in deciding how much to raise the rent for my tenant involved some simple math. Knowing that I was renting below market, and that I really wasn’t intending on stacking a 25% increase on the Tenant all at once, because again, I really like this tenant, I made some back-of-the-envelope calculations involving the total increase in property taxes.

The total hit I’m taking from the tax-man is an extra $600 per year on the duplex. So that’s $300 per side, per year. Boiling down to $25 per month, which should be pretty easy to swallow, and I’ll leave it at that. But obviously, I could have taken this opportunity and treated it like the proverbial bandaid-ripping by stacking some other accrued/planned costs into this rent hike.

Other possible reasons for bumps in rent that could be similarly calculated:

1. adding to or starting (!!!?) the maintenance contingency fund
2. beginning savings for a beautification project like landscaping
3. put toward paying off an uninsured disaster of some sort
4. put toward a new amenity such as washer/dryer, screen doors, or skylights.

Although, with that last one, I’d recommend buying and installing the amenity first, and then using their use of the thing to justify the rate hike, accepting the risk that they may choose to leave as a result.

Set with the $25 bump in rent, I composed the following letter to be sent via email AND by hand delivery. I coincided the increase with the renewal of the lease, as it wouldn’t make much sense to try and renegotiate a loaded lease in mid-stride. File the letter along with whatever documentation of acceptance you receive (new rental agreement, amendment, spit-shake). Best to get as long a paper trail as possible with these things.

I hand delivered the letter in order to garner an immediate response from the tenant. Otherwise, I would have to requested some other form of written acceptance.

Begin Letter------------

DATE <-- EXTREMELY IMPORTANT TO DATE IT

TENANT NAME and CONTACT INFORMATION

Dear (use all tenants’ complete names here for professionalism):

This letter is being forwarded to you as a notification that as of October 2006 (by the 5th of the October), your monthly rent will be increasing an additional $25.00 per month, to help keep up with the recent rise(s) in property taxes. It will move from the current rate of $XX00.XX per month to $XX25.XX per month.

For clarification, August and September rent will remain at $XX00.XX..

In the most unfortunate event that you do not wish to continue living on the premises by these terms, I will understand. But please notify me as soon as possible concerning when you would like to move so that we can make the proper arrangements.

If you choose to accept this increase in rent, this letter will be followed by an amended lease renewal agreement.

Best regards,

YOUR NAME and CONTACT INFO - SIGN IT!!!

------------------ End Letter

Next will be their reaction to the increase.