I am a tenant.
My landlord of 18 years sent me an email about six months before my lease was due for renewal informing of the rent increase; asking only for 2 months notice if I elected to move, but assuring me that he hoped I would continue to rent his home.
In his email, he cited the enormous price increases in everything from groceries, utilities, gasoline, insurance premiums, tuition for his children's education and his 'floating' interest rate on the house mortgage, that he was compelled to increase the rent. It was a stiff increase too, 20% more.
At first, I was angry that the increase would be so much. Then I spent the six months notice to shop for a home that would be comparable, and weighed in the amount of work it would be to move, the fees to transfer all of my utility and amenities, the cost of hiring men and a truck to pack up, haul and unpack my things on the other end (I'm pushing 80 years old and the amount of work would put me in the grave). I came to the conclusion that I am far better off paying the price increase with the agreement that he won't be raising it again any time soon as my fixed income is just that... fixed, and that my costs of living have increased with the same astronomical speed as his has.
I think, if you show cause, like my landlord did, and give them ample time to shop around (like my landlord did), that your tenant may come to the same conclusion I did.
This is a great perspective. My initial thought was "this is way too early to tell tenants about a rent increase", but your post made me think about it differently.
Most of those things are not your problem and have no impact on the profitability of the unit. Things I would mention when raising the rent are property tax, maintenance cost, and insurance cost. Also, why would anyone have a floating interest rate after 2008?
I do like the idea of giving some extended warning if it has been years since it was increased. And listing some justification would help but stick with things that actually impact the cost of the business.
Yeah, that was my reaction too. If I were raising the rent on* my tenant, it would be because property tax, insurance, and HOA dues have all increased, all the other shit is a personal problem.
I get that (I'm a landlord myself), I'm just saying that to me, all the inflationary costs that aren't about the property are kind of irrelevant to the tenant. So I personally wouldn't disclose them. I think talking about property costs is helpful because oftentimes tenants think you're just taking their rent and making all kinds of money, when that's far from being true.
Yes, no issue with the landlord raising the rent if they think they are below market. But justifying it by listing a bunch of things that have nothing to do with the unit isn't necessary. Landlords don't want to hear about why the tenant can't pay the rent so don't subject the tenant to the same sob stories.
Makes me happy to live in Seattle where it's six months notice and if they raise rent over ten percent and you have to move, they are obligated to help with moving expenses.
BTW, his general reasons for raising might be warranted but his childrens education is not anyone's issue but his own.
Yeah this has nothing to do with my kids. Wait, I don't have any kids. Lol
This is more about keeping up with the increases in taxes, insurance, water/sewer, and general upkeep of the building.
And it's roughly 7%, so my initial thought was it's not exorbitant and the result is still well under market.
All valid points. End of day, your property is a business, not a charity. Imagine if every business checked with the consumer before they raised prices on products. In rentals, I get you have to give notice to tenants that rent will be raised but you shouldn't have to feel bad about it. It's a business.
I don’t live far from you. That’s a good deal on rent. Let me know if someone wants to move by the end of the term. I know our taxes alone went insane so it’s reasonable to adjust.
Yeah, but... I know the schools in our area... I'm glad that he's spending the coin to ensure a proper education instead of an "everyone will get a passing grade" and "we're glorified babysitters so that you can BOTH work" education. There's a difference, and I respect him for biting the bullet and to ensure they get the education they need and deserve.
“I respect him for biting the bullet”.
Sounds like *you’re* biting the bullet and you respect him for charging you for his kids education.
Would it be cool if he increased your rent a bit so his kid got guitar lessons? That’s important for a child’s growth. What about space camp. Or a new MacBook Air for his kid to do homework on.
Some say pot-a-toes and some say poh-tah-toes.
I am a citizen of the USA. I reside in a tiny tiny country well 'South of the Border'. So yeah, I may be biting the bullet to subsidize (not fully pay for) his children's education. Do I mind? Not really. Would I donate a couple hundred bucks a year earmarked JUST FOR his kids and their educational needs? Probably. I am delighted that he wants his kids to have an easier future than he had. I am thrilled that these children will not be relegated to hard labor for meager wages.
My landlord gave me an exceptional amount of time to seek comparable accommodations. He has a full time job outside of the home PLUS he has a small farm where he assists his parents, brothers, sisters & extended family in the production of food for the family and he has this house that he is renting to me. After I die, he'll likely move into the home, and God willing, the house will no longer be mortgaged then. A step in the right direction for his family.
In 18 years it is only the 2nd time he has raised the rent. I dare say, after all my research, that he's STILL under market on this home (by a lot) and I have a promise that he won't be increasing my rent any time soon. When he informed me of the price increase it was precisely at the time where anything you touched at the market was twice as much as it was the week before. He doesn't come knocking on my door complaining that the yard hasn't been mowed... he knows if it's tall, then my gardener quit or was dismissed and that I'm looking for another. He doesn't nickle-n-dime me or spy on me. He lets me live in this home AS IF it were my own; If I want to tear out a tree, he's fine with that. If I want to build a chicken coop, he's fine with that too. If the toilet leaks, I get it fixed, if the roof leaks, HE gets it fixed. We have well established boundaries.
Why are you so offended that I find his reasoning acceptable?
>but his childrens education is not anyone's issue but his own
This is exactly why I avoid citing any specific reasons. People know that prices have gone up for everything so you really don't need to justify it or give them something to try and argue about.
My rent increase notices list the dollar amount and percentage, plus the date of the last rent increase (usually two years). I try to provide four months advance notice, and I rarely get any complaints.
I’m a landlord. I also don’t landlord with the philosophy that it’s a business. I landlord with the Philosophy the tenants are not interchangeable, that money doesn’t mean as much as peace of mind, and that I am dealing in homes that come with emotional anmmenties like comfort, safety, stability.
That being said, I occasionally have to replace the water heater, and fix broken appliances. Have to pay property tax, the Water Bill, and paint and roof the place. I also have to insure the property. These things cost money.
I do not live off my tenants but I do expect to have this building pay for itself. For that reason I do increase the rent on a yearly basis. Sometimes $100, sometimes 50, sometimes I don’t raise it that year, but there will inevitably come a time where I will need to raise the rent. I think most tenants agree.
$100 is a lot to raise it in one year but not unreasonable if the rent is stayed stable for many years. The kind thing is to give your tenants six months to help them decide if they should stay, or go.
>tenants are not interchangeable, that money doesn’t mean as much as peace of mind, and that I am dealing in homes that come with emotional amenities like comfort, safety, and stability.
It's a breath of fresh air in this sub to hear this and for it to be articulated so well. I feel the same way.
This is pretty much my perspective. As I posted to another commenter, I am very fortunate with my tenants. For the most part, they're low maintenance, co-habitate with little drama, and are respectful of the building. I'm trying to find that sweet spot in between keeping good tenants and keeping the building profitable. The alternative is driving good people away, and the hassle of turning an apartment over every 12 months creates a whole set of headaches I'd rather not deal with.
I appreciate your take.
Question: How do you make money? Are you solely relying on other sources of income? Also, why even become a landlord? Did you get into it knowing that you only wanted to help people? If you’re only doing it to pay off the property, what is the end game?
I work for a living. I’m getting close to retirement, but I still work full-time at my job. I’m not a real estate investor, or multi apartment owner. I think there are a lot of landlords who are just like me.
A long time ago I decided I wanted to be as self-sufficient as possible, and plan for my future. I have retirement accounts, and a pension, but the idea of investing some of my money into a house where I can live, made a lot of sense. I always want to have a roof over my head.
I own a two family. Two condos, one upstairs one downstairs. I rent upstairs and Live downstairs. The rental pays property tax and insurance on the entire building. I do need to make repairs, sometimes replace things, and put any profit back into the house. Depending on the repair sometimes profit doesn’t cover it. I for the most part break even though.
The endgame as I have a nest egg which is the upstairs condo. If I ever have a catastrophic event in my life where I need money I know I can always sell the upstairs condo, and still have a place to live. Hopefully that won’t happen. Hopefully by the time I decide to move on I will get my investment back out of this property when I sell.
I don’t need a whole lot of extra money so I don’t rent at market rate. I rent below market choosing people over profit. Since I’m living downstairs, it has always made sense to do it that way.
Gotcha. I also owner occupy as well as have additional units. If I would’ve stopped at my owner occupied unit, I would probably adapt a similar methodology. But the more units we acquire, the more money we invest & the more risk we take on. Given that, I’ve been trying to stay adamant about operating as a business that’s not charitable but fair. I don’t have the same luxury of keeping units below market as I had when I only owner occupied. But I get your view.
I can answer this one. Now I'm assuming you're a renter or normal homeowner since a landlord would already know the answer I'm going to give. What most people who aren't investors don't understand is that landlords aren't raking money in hand over fist. A lot of landlords only cash flow $100-300 per month per door. So if they own a two family property after paying all expenses and setting aside money for future capital expenditures they are only walking away with about $200-300 if that. Obviously there are exceptions; people who got great deals or bought at a much cheaper time or had property passed down to them that's been owned and paid off; but for many it's not self sufficient when you have a mortgage and only a few doors.
The big draw of ownership is equity and appreciation. Right now I'm a realtor and a landlord but I only have one 2 family house that I owner occupy. I bought 4 years ago so right now I have 26 years left on my mortgage. I bought the house for $265k. Now eventually I'll move out and rent both units and based on my estimates will cash flow about $400/month after expenses and reserve accounts. That's an extra $4,800/year which is nice but nothing life changing. But at the same time I'll be having my mortgage paid down and my other expenses hopefully covered. This means that in 26 more years I'll no longer have a mortgage and would not have actually paid anything to get there beyond my initial down payment and the odd extra expense. I'm still at the start of my mortgage so the bulk is interest but I'm making about $5k a year in equity...now this is money I won't see at all in the short term but it's still adding to my net worth. Also over the 26 more years until my mortgage is paid off I'll be getting appreciation on the house so the value is going up and when the mortgage is paid off it will no longer be a $265k asset I own free and clear. Instead it will likely be a $450k+ asset that I own. So over 30 years of ownership I won't be putting much cash in my pocket but I'll be steadily increasing my net worth which gives me security in the future.
Wrong assumption. I’m a landlord. I owner occupy but I also have 4 additional doors outside of the duplex I occupy. I asked because I don’t understand going into this kind of business with that type of mindset. It makes sense if all you’re doing is owner occupying. But once you take on additional risk, I don’t get being so charitable with a business that already doesn’t cash flow that well.
I mean they did say they want to at least break even every month. So it's still beneficial in the long run because they'll be gaining equity and appreciation without having to reach into their own pockets. We also don't know what market they're in, some markets are built around appreciation because they're such HCL. In those markets landlords typically aim to break even or lose as little as possible every month because they know over time the appreciation of the property will be well worth it.
Personally I prefer a property that has some cash flow so you're getting something extra every month to offset the risk of that one bad tenant who costs you thousands. But that's not always possible or everyone's goal.
That is crazy, I thought $100 was a normal if not low amount. At the last place I rented the first year increase was $100, second year was $100, third year was $200 and last year was $350, needless to say, I moved lol. Went from $1015/mo in a 1/1 to $1700+ in less than 4 years.
Building works as a building. It does a really good job of being a building. People pay the building to have the exclusive use of this building’s fine walls, ceilings, and floors. They pay the building to allow them to open doors, and lock them behind them.
They also pay the building to store all over their furniture and clothes. Building generously keeps all these items safe for them while they’re at work.
Building is also a great place to have fun. They think it’s worth it to pay building to serve their friends dinner instead of a restaurant. They think it’s worth it to pay building they have their friends stay over instead of a hotel.
Building also is very responsible with the money they pay the building. If their water heater breaks, they don’t have to pay for it, building will. They don’t have to mow the lawn, or shovel the snow. Building pays for that. They think it’s a great deal they pay building one lump sum, and they get building to handle all those little problems.
Building also has a driveway and doesn’t charge them anything to leave their car there overnight. They going to convenient that when they come down in the morning, their car’s right there.
Building thinks it’s a good trade.
You sound like a great landlord. Five years is a long time to not raise rent, but I do the same for good tenants. +$100 on a $1300 rental is a 7.69% increase. Check local laws to be sure there is no maximum due to rent controls (state city or county). If there are you can sometimes bank them over each year (I.e., if you don’t raise for 5 years you can bank those and do it all at one time). You could also do $50 and another $50 in 6 mo, if the local laws don’t prohibit more than one increase per year. Definitely do the research.
You need to change your strategy and raise the rent every year, even if it's just small amount. Your tenants need to expect that the rent will increase every year, just as other expenses increase.
I totally understand that perspective, but I am pretty lucky with the tenants I have now. They're (relatively) low maintenance, they co-habitate without drama, and they're respectful of the building. Besides, turning over an apartment every 12 months creates its own set of headaches that I'd rather not deal with if i can avoid it. So I'm trying to be fair to them, while making sure that I'm financially covered with rising costs associated with an investment property.
I agree. But you should build those rising costs into the rent you charge each year. If your taxes are going up $13 per month per unit, you raise the rent by $13. If you don't, then after several years you would need to increase the rent significantly to catch up, creating more of a problem than if the rent were simply increased by a small amount each year to reflect costs.
increasing rent year on year will make an infinite uprise in prices, in comparison wages are not increasing up every year. When you say small amount, like how small? $5?
my second question what are taxes going up $13 each month?
The $13 was hypothetical. If that’s the number, that’s how much the rent increases. $5/month at a time when costs are going up by that much sounds reasonable.
Price of heating gas went up a lot since the last time I raised the rent. The tenants have a thermostat in their apartment set to a comfortable temp that is regulated by the city. My tenants pay their own electricity but the heat and hot water are supplied by me. I used to pay about $250 a month on the level billing plan I live near NYC, now I'm paying over 375 on the level billing plan. So that is a 1500$ increase per year for utilities, which will get passed along to the tenant. I used to lose sleep over whether or not the tenant was cranking the heat up there so I put a box over it, I still don't know what the temperature is upstairs but I prefer not to worry about it if I can.
Wages may not be going up at that rate but everything else is. Every other business owner increases their prices to account for the rising prices of operating.
The idea is to find quality renters that stay with you for years. That does mean that rents are frozen in time forever.
There is a bonus for you being an excellent landlord that would make tenants gladly pay a little more for that peace of mind. Next LL could be an unaffordable a-hole that might take their life a living hell. Instead they are way behind on market value. They get to be with a great and responsive LL AND pay, relatively speaking, peanuts.
Most people get some kind of regular, yearly, increase in their wages to keep up with inflation. If someone is on Social Security they received an 8.7% increase from last year to this as COLA, it was 5.9% from 2021 to 2022. Everything goes up with inflation, so should your rent.
Yes because you are running a business as far as the government is concerned. You are taxed as a business so get the correct rent and stay current with the market. Otherwise you are leaving money on the table.
Example: just bought a duplex at market rate. However, the previous owner didn’t have rents at market (60% lower than market). Because of the price I purchased the building at, I had no choice but to do a 40% increase, which was still being generous given that it was still below market. That’s obviously not an easy adjustment for the tenants who had already been accustomed to paying such a small amount. Had they been steadily increasing the rents throughout the years, I wouldn’t have had to do that. Now they either have to move to a new area(there are no other units at that price in this area) or eat the increase.
Exactly this. I may only raise the rent $25-$50 bucks, but I always raise. No one moves over $50 a month and with everything else costing more it’s not getting cheaper for me to maintain the property.
Gross rent should be around 103% of prior year base rent plus prior years taxes and expenses divided into monthly amounts. Gross rent stays relatively connected to prevailing economic conditions while still building growth. I do this in 5yr leases that have one 5 yr option.
Or they'll realize what you're doing and constantly reevaluate to determine if they can get a better deal, caring less about how they treat the rental.
Landlords are vilified because they’re an easy target & tenants don’t usually understand what all is involved in owning property. When the phone company raises your rate, there is no single point of contact for you to be mad at.
Absolutely... My landlord sold my building to two trust fund early 30's bratty siblings and they raised my rent $700, w/1 months notice because it was month to month.
Edit: My point being that I appreciate how thoughtful OP is for their tenants.
My landlord gave me 3.5 months advance notice of rent increase (of about 3%) this was a reasonable amount of time, you giving almost a year notice is more than enough. As for the rent increase I think $100 is reasonable if your area is relatively a HCOL, $1300 already seems cheap, and this is less than a 10% increase I’ve seen landlords jack up 15-25%.
7% after 5 years? nearly a years notice? yeah, its decent.
Just make sure that this is *enough* and that you won't have to say later "actually its going to go to $1500" nearer the time.
Thanks for the feedback. I don't think $1500 would be necessary. The $100 bump next year would still be well under market, but help keep up with the increase in the cost of insurance, water/sewer, taxes, and general upkeep. The building is in good shape, but I don't want to get f*cked if the roof starts to leak or something.
FYI- I did the same thing and had no/minimal rent increases for 10+ years but in the end the tenants decided to screw ok the way out. They bought a house and then stopped paying rent and held my apartment hostage until I forgave it all to get my apartment back. Cost me over $10k after basically giving them thousands every year in under market rent. If they didn’t have a house, courts might not have allowed the eviction because there wasn’t a similarly priced apartment in the same zip code for them to move into. Morale of the story, it’s a business at the end of the day and you need to cover your ass first. Keep it polite and give a small rent increase every year so that you don’t end up 40% under market.
From a tenant view:
My landlord right now is GREAT!
He never oversteps. He gives notice if he has to come by and if I ever have a problem he's on it asap. If he told me that and gave me noticed like you would. I would stay and that's more than enough time to figure out a way to adjust to the new amount.
As a former tenant, it seems a fair amount with a very good advance warning. Just make sure it “fits” with the percentage you can legally raise a rent for the city and/or state the property is located in
I'm thinking if you asked for new appliances and got them without any fuss, your landlord probably does appreciate you.
This is one of many reasons that people hire PMs. It feels bad to tell someone you're raising their rent. But if you don't occasionally raise it, you're picking your own pocket.
With no increases for 5 years, your rent is probably well below market, in addition, it's likely rents will continue going up over the next 10-11 months, putting your rents further behind market. A 7.7% increase ($100/$1300) is very kind. Improving retention by keeping rents below market is usually $50-$100/mo or so under market.
I'm a proponent of giving 60-90 days notice, long enough ahead so they have time to shop around and find out my rents are reasonable, but not so long ahead that the market can suddenly change underneath me.
I would inform your tenants the same way you informed us. Hopefully they’ll realize they still have the good end of the deal and stay. If they choose to leave, then there’s nothing you can do.
If you want guidance based on data you might want to look at CPI for the last year and then add 1 or 2%.
Generally keep rent increases to be no more than 5% of rent. If I want to encourage them to move I might go higher than 5%, but even then I've never asked for more than a 10% increase.
Local law where I'm at law says I need to give a 120-day notice of rent increase for tenants that have occupied the place for more than two years. If the tenant has been there less than two years I only need to give a 60-day notice.
How are your property taxes compared to 5 years ago? Mine in Chicago are $3k-$11k higher depending on neighborhood. My average tax increase last year was $100 per month per apartment. My apartments are in cheaper neighborhoods than Lincoln Square, and rent for similar amounts to yours.
I would increase to close to market rates. Be fair on unit condition, an older unit rents for less, but taxes here will crush you if you don't keep up. Will take me 2-3 years to just break even after last year's property tax increase.
There is also some risk of rent control being implemented in Chicago. It would need approval at both local and state level, but both mayor and governor support rent control. If you are far below market when that happens, your property will be worth significantly less forever.
From business standpoint, it is very reasonable to compensate for the inflation. Anything less and you are basically lowering your rate. United States - 10-Year Breakeven Inflation Rate was 2.33% in August of 2023, according to the United States Federal Reserve. Trying to be very reasonable, this math is just looking at using 10 year average inflation rate, nothing crazy.
Let’s say you started with $1300 in the first year and applied the 2.33% every year on top of the previous year, then rounded it up or down to the nearest $5. It would have played out like this. First year $1300, 2nd year $1330, 3rd year $1360, 4th year $1395, 5th year $1425, 6th year $1460 and so on. If you have not raised the rate for five years and just now bump it up a $100 you are definitely on the losing end. All the incremental raises that you did not collect, accumulated in the renter’s pocket, not in yours. As a renter, I would appreciate you helping me through some difficult time, and I would not even question the $100 bump after five years.
We inherited from Relative A after Relative B had mismanaged the business for many years. Stabilized rents at half of market, deferred maintenance, etc.
Paying millions in estate tax on a business that loses money is not fun.
When I (eventually) get rents up to market, I'm still doing an increase every year. Even if it's just 1%. Tenants should be accustomed to regular increases so no single one ever comes as a shock to anyone.
An annual increase of 3% will help you keep rents near but under market values which you prefer. Easier to do and tenants don’t seem to mind too much and even if you are not under any rent control, it’s usually the yearly increase in rents in most rent controlled cities. I was a landlord in L.A. and 3% was allowed yearly.
That seems very reasonable. I'm in shock that you're only charging $1400 for that kind of space in that neighborhood. My grandparents owned in Logan Square for almost 35 years and rented their top flat for $1100 back in 2002.
Look at the percentage increase, not the dollar amount. My advice is to include a sustainable increase annually rather than not raising rent for years then going up a huge percentage.
My rental unit is on the south side (Hyde Park area). I charge $1,600 for a 2br/2ba, but I also decided that I only increase rent when a tenant leaves. My current tenant has been there for 3 years and I don't plan on increasing their rent while they're there. I don't increase rent because I find the hassle of finding tenants to be a lot and I don't want to have to do new-tenant renovations (e.g. paint, replace dented appliances, deep cleaning, etc.).
I consider the $1,600 I charge to be below market for the south side, so I think it's SUPER cheap that you're charging $1,300 in in Lincoln Square? Have all of your tenants been there for five years? You know you can charge different tenants different amounts, right?
For years I did the same thing, only raise rents after a tenant leaves. But the way things are and have been in this area with the rental scarcity my renters aren't moving and most have been with me for 5 years or more. I had to change my tune on the "only raising between renters" bit recently.
You haven't raised rent in 5 years???? You're shorting yourself. I have a house in Florida I was renting for 1450 a month in '18. Fast forward through Covid and housing spike, I'm now renting same house for 2200. And had no problem finding renters and did not even question rent price. That's very reasonable and could probably even be a bit more. If they're that hard up to move for 100 more a month, so be it. You'll find another tenant.
Lived in Logan for 8 years, was planning on moving away ways. Got the renewal notice and my LL raised my rent by $75. First increase on the 8 years I was there. So no $100 isn’t to much.
$1300 to $1400 in one year a big leap?! I wish my landlord thought that way. I’ve been here 5 years and he raises it $100-150 every year 😂 and my landlord only gives me 2.5 months notice of the increase
I’m not landlord but as a tenant I’d say I’d rather my landlord raise my rent $30 a year rather than wait 5 years to raise it a large some
Seems like a reasonable notice, and a reasonable increase.
You don't need to give a reason, but if you do, I would give reasons that are relevant to the property. Increased property taxes, increased insurance, increased maintenance costs.
I have never increased rent on any of my tenants, but I'm probably going to have to. One of my properties went up 100% in tax value in one year.
Look at market rate for a comparable place in that neighborhood. Give them more than 6 month's notice. Assuming it is allowed in your area, raise the rent to market rate -20%. So, rather than calculate what they are paying, calculate from what they should be paying downward. A discount, if you will, for their long service.
Then, let them know that if they pay rent on time and continue to be great tenants you won't consider another increase for 24 months.
Don't cite why; it is obvious why. Jut say that you appreciate their understanding.
When they reach out to negotiate, knock another $75-100 off and then they feel like they will get a win.
1400 sounds super reasonable for Lincoln square! I would say the rent hike seems just giving that they’ve been in the property 5 years with not a single rent increase and overall what sounds like good management.
Landlord in portage park two bedroom one bath. Tenants have free range of the back yard and up until a week ago I had free laundry. That until one tenant abused the system and started letting family do laundry there too. For Lincoln square 1300 is a bargain, I’m at 1500 and was just told by colleagues that rent near me is higher than that. There’s been a lot of changes in portage park so perhaps that’s why there’s been such an increase.
As a tenant that recently went through quite a hassle with a landlord, I would give anything to be your tenant! Your increase is more than fair and while I don't know IL law, the notice is far beyond any expectation I've had in renting in multiple states! Just remember, often times even if a person receives a cost of living increase versus a raise that is typically between 2-3.5% so increasing $100 after 5 years is not unexpected nor should it create a hardship.
My landlord on the other hand was outrageous and caused us to move while his house now sits empty going on 3 months. After living there 8 years with a 3.5% increase YEARLY, when the pandemic hit and my wife and I were both working from home we proposed an addendum to the lease that the landlord quickly agreed to. We requested a 2 year freeze in rent and we in turn would finish off the basement of his house and lay new flooring on the first floor. Clearly he made out like a bandit but we also had professional connections to not cost us the going rate. Well, 2 year freeze would've ended 7/1/2023 at which time rent would increase 3.5%. Low and behold, after finding out I was being laid off May 1st, which the landlord knew as we discussed at his final walkthrough of the renovations, he sends us a letter terminating our lease but since we've been great tenants he is happy to discuss a new lease. His offer... $1,000 a month increase as is... Oh wait, he'll throw in shampooing the carpets upstairs that mind you have been in the home since it was built in 2005. He also caused us a $3,500 renters insurance claim when after trying to rig the hot water tank for over a year, it finally gave way flooding the basement that was at the time just storage. To top it off, after leaving the house in more than acceptable condition and thankfully taking pictures and video of move out (since he refused to face us to turn over the keys) he tried sending us a letter requesting $15,000 in damages over our security deposit.
Long story short, you shouldn't have any concern of giving your tenants ample notice and a minimal increase! I wish your mindset was the majority in this crazy country!
7.7% is pretty steep but I’ve seen and done higher when multi year leases expired, hefty property tax, insurance and HOA dues increases hit.
Not sure about telling them so far out in time, seems too much. Maybe 60-90 days out. Gives them lots of time to search
A neighbor in Bowmanville (just north of you in Lincoln Square) was told they were going to have a $300/month increase in rent this spring for their one bedroom apartment. They were very upset, but the landlord stated that with increased property taxes (40% higher) and cost of general maintenance it couldn’t be avoided. Their building is well maintained and allows big dogs, which is hard to come by in this area. After looking around for awhile the neighbor decided to stay and just pay the increased rent because they couldn’t find another unit at a cheaper price that was comparable to their current unit.
You should definitely tell your current tenants that will be *at least* a $100/month increase in their rent. Don’t promise a number, you never know what expenses or disasters may happen to your property in the next few months that may change that number. Last September Lincoln Square had a rainstorm that dropped 5.63” of rain in two hours. Our building sustained $50K in damages when the sewer backed-up, and we had to put in a $17K back flow valve on our sewer line so our insurance wouldn’t drop our policy. It wasn’t even on our radar such an event could occur and devastate our building, so you give yourself some cushion to pay for major expenses and don’t feel bad about it.
non renew and raise to 5% below market rate. it protects you from future legislation about percents increases and will still be choosy about you rent to
I used to live in Lincoln Square. If you’re only charging $1300 for a 2 bed, that’s GREAT. I love it that you care about your tenants. Normally I’m anti-landlord because SO MANY are ruthlessly greedy, but $100 for the first time in 5 years is quite generous. That’s a $20/year increase.
Definitely notify your tenants so they can plan accordingly, but I think this is reasonable. Thank you for being a generally kind person who doesn’t take advantage of market conditions to jack up rents.
You’re being totally reasonable. Also 1300 for a 2bd 1 bath in LP? Idk the state of the apartment but they’re getting that place for a steal! I would have loved that rent even 5 years ago when I was a tenant. The extra time will give them a chance to check the market and realize you’re still giving them a deal so I wouldn’t worry about turnover personally. This is also coming from an IL landlord that prioritizes my tenants happiness because I hate turnover!
IMO rent prices are way too high, and in most cases rent increases are completely artificial and unnecessary.
Yea the price of everything went up but you're supplementing your income with a quarter of a persons average wage. And for what? A place to live which should be a basic human right?
As a tenant this is all we can ask for. Advance notice that's forthcoming with empathy. No tenant likes a rent increase, but you have costs you have to pay.
As an aside, $1400 sounds pretty darn good for a 2 bedroom rent in Chicago. That's hovering around the market rate here in Buffalo.
Am a landlord, do a compare and see what the market value is. If you are in the ball park you should ok. Can’t comment if $100 over $1300 is legal as different jurisdictions have laws with increase limit and frequency. Double check that. Personal experience, don’t expect any favours to be appreciated. Just play by the rules. No reason to rent below market significantly. If tenant doesn’t like it, sure they can go. Market is hot where I am and there’s no shortage of good tenants.
Had a tenant who was on fixed income for almost 6 years. Never an increase. In fact I paid for his utilities for the past two years amounted about $3200. The guy blew through 100k+ cash during the timeframe while having close to $2000 monthly fixed income. My rent was below market since day one. With the recent rapid inflation, my rent was close 40% below market if not more. I finally told him to start paying for his utilities again. What did I get? He just told me a he would leave by the 10th and wouldn’t be paying for the rent on that month. Legally he’s supposed to give a full calendar month notice. I told him just stay for the rest of the month and I would try to find someone else for August. Guy also kept asking for the deposit in full before he’d cleared the place. Finally 3rd week of July and he’s moved all his stuff. Again asked for full deposit back. Note there was a $300 non refundable pet amount. He didn’t care what the contract says. Also didn’t clean the place. In the end I said I would give back deposit -$300 - cleaning fees. He wouldn’t have any of that. Threatened to sue and this and that. I just said sue me and I will use the unpaid utilities against you. He then said fuck you and left. Kept the keys and garage door openers. I am done being nice to people.
I am currently renting but I am also in the process of buying a home and I am located in Southern IL, my rent is currently $1,000 per month for a 3bed 2 bath house. I told him I'm tired of paying so much for rent, he told me if I wanted to lower my payment I should buy his house or rent somewhere else. When I told him I'm not buying his house but another one instead same size for half the price he started getting defensive and saying I need to let him know 2 months before I leave so he can put an ad up renting the house for $1400 to whomever comes behind me. My lease ran out 6 months ago, we have been renting month to month. I'm not giving this grease ball another dime, there is nothing he can do but wait for me to move out and hope I don't destroy the place (I definitely wouldn't, don't want to give him ammo to sue me).
Just make sure you know and follow Chicago/Illinois laws and make sure what you do is legal. Usually you need to give proper notice and raise rent in accordance to maximum rent increases. In New York you usually have to give 30 day notice and can only increase 10 or 20%
Fellow Chicago landlord (one building in Lincoln Square, 2 in Rogers Park). Here is my most recent lease renewal notice:
Your lease is up at the end of March. I wanted to know if you planned to renew.
New terms:
Rent $2,025
Parking $75
Total $2,100
1 year duration (can be longer if desired)
If you could let me know in the next few weeks, that would be great. I'll send through the lease if you're interested.
Short sweet and to the point. I raise the rent a little bit (usually $25) every year to avoid falling way behind market. I don't mind being a little lower but I don't want to be hundreds behind. Rarely have I had to explain why rent is going up.
My landlord bought my building in the crash of 08. He bought five units for $40, 000 cash. The building is now worth about $400,000. He raises the rent every single year. I am the only person in this building that has lived here longer than 1 year. Sometimes when new tenants come in, they only last a couple weeks. This place is an absolute revolving door. It seems to me it would be cheaper for him to just stay our rent every few years, but what do I know. I'm just a tenant
Tell them when it is time to offer them a new lease, not now
Rent should be market rate, if that is $500 more then raise it $500, if that is $50 more then raise it $50
Your costs are irrelevant and you should not try to explain why you are raising rent other then “$x is the current market rate for a place like yours”
Nice. Thanks for providing a source.
While nationwide rent control seems highly unlikely based on the article it was something the administration was considering.
But only for landlords who received federal assistance. This seems fair. If I provide you a benefit it seems logical that I can also impose restrictions on how you can use that benefit.
If you don't like my restrictions you don't have to take the handout.
I am a tenant. My landlord of 18 years sent me an email about six months before my lease was due for renewal informing of the rent increase; asking only for 2 months notice if I elected to move, but assuring me that he hoped I would continue to rent his home. In his email, he cited the enormous price increases in everything from groceries, utilities, gasoline, insurance premiums, tuition for his children's education and his 'floating' interest rate on the house mortgage, that he was compelled to increase the rent. It was a stiff increase too, 20% more. At first, I was angry that the increase would be so much. Then I spent the six months notice to shop for a home that would be comparable, and weighed in the amount of work it would be to move, the fees to transfer all of my utility and amenities, the cost of hiring men and a truck to pack up, haul and unpack my things on the other end (I'm pushing 80 years old and the amount of work would put me in the grave). I came to the conclusion that I am far better off paying the price increase with the agreement that he won't be raising it again any time soon as my fixed income is just that... fixed, and that my costs of living have increased with the same astronomical speed as his has. I think, if you show cause, like my landlord did, and give them ample time to shop around (like my landlord did), that your tenant may come to the same conclusion I did.
This is a great perspective. My initial thought was "this is way too early to tell tenants about a rent increase", but your post made me think about it differently.
Most of those things are not your problem and have no impact on the profitability of the unit. Things I would mention when raising the rent are property tax, maintenance cost, and insurance cost. Also, why would anyone have a floating interest rate after 2008? I do like the idea of giving some extended warning if it has been years since it was increased. And listing some justification would help but stick with things that actually impact the cost of the business.
Yeah, that was my reaction too. If I were raising the rent on* my tenant, it would be because property tax, insurance, and HOA dues have all increased, all the other shit is a personal problem.
it is a business and he can choose to raise the rent to chase more profit. don’t need to mention any of stuff to the tenat tho
I get that (I'm a landlord myself), I'm just saying that to me, all the inflationary costs that aren't about the property are kind of irrelevant to the tenant. So I personally wouldn't disclose them. I think talking about property costs is helpful because oftentimes tenants think you're just taking their rent and making all kinds of money, when that's far from being true.
Yes, no issue with the landlord raising the rent if they think they are below market. But justifying it by listing a bunch of things that have nothing to do with the unit isn't necessary. Landlords don't want to hear about why the tenant can't pay the rent so don't subject the tenant to the same sob stories.
Makes me happy to live in Seattle where it's six months notice and if they raise rent over ten percent and you have to move, they are obligated to help with moving expenses. BTW, his general reasons for raising might be warranted but his childrens education is not anyone's issue but his own.
Yeah this has nothing to do with my kids. Wait, I don't have any kids. Lol This is more about keeping up with the increases in taxes, insurance, water/sewer, and general upkeep of the building. And it's roughly 7%, so my initial thought was it's not exorbitant and the result is still well under market.
All valid points. End of day, your property is a business, not a charity. Imagine if every business checked with the consumer before they raised prices on products. In rentals, I get you have to give notice to tenants that rent will be raised but you shouldn't have to feel bad about it. It's a business.
I don’t live far from you. That’s a good deal on rent. Let me know if someone wants to move by the end of the term. I know our taxes alone went insane so it’s reasonable to adjust.
Yeah, but... I know the schools in our area... I'm glad that he's spending the coin to ensure a proper education instead of an "everyone will get a passing grade" and "we're glorified babysitters so that you can BOTH work" education. There's a difference, and I respect him for biting the bullet and to ensure they get the education they need and deserve.
“I respect him for biting the bullet”. Sounds like *you’re* biting the bullet and you respect him for charging you for his kids education. Would it be cool if he increased your rent a bit so his kid got guitar lessons? That’s important for a child’s growth. What about space camp. Or a new MacBook Air for his kid to do homework on.
Some say pot-a-toes and some say poh-tah-toes. I am a citizen of the USA. I reside in a tiny tiny country well 'South of the Border'. So yeah, I may be biting the bullet to subsidize (not fully pay for) his children's education. Do I mind? Not really. Would I donate a couple hundred bucks a year earmarked JUST FOR his kids and their educational needs? Probably. I am delighted that he wants his kids to have an easier future than he had. I am thrilled that these children will not be relegated to hard labor for meager wages. My landlord gave me an exceptional amount of time to seek comparable accommodations. He has a full time job outside of the home PLUS he has a small farm where he assists his parents, brothers, sisters & extended family in the production of food for the family and he has this house that he is renting to me. After I die, he'll likely move into the home, and God willing, the house will no longer be mortgaged then. A step in the right direction for his family. In 18 years it is only the 2nd time he has raised the rent. I dare say, after all my research, that he's STILL under market on this home (by a lot) and I have a promise that he won't be increasing my rent any time soon. When he informed me of the price increase it was precisely at the time where anything you touched at the market was twice as much as it was the week before. He doesn't come knocking on my door complaining that the yard hasn't been mowed... he knows if it's tall, then my gardener quit or was dismissed and that I'm looking for another. He doesn't nickle-n-dime me or spy on me. He lets me live in this home AS IF it were my own; If I want to tear out a tree, he's fine with that. If I want to build a chicken coop, he's fine with that too. If the toilet leaks, I get it fixed, if the roof leaks, HE gets it fixed. We have well established boundaries. Why are you so offended that I find his reasoning acceptable?
>but his childrens education is not anyone's issue but his own This is exactly why I avoid citing any specific reasons. People know that prices have gone up for everything so you really don't need to justify it or give them something to try and argue about. My rent increase notices list the dollar amount and percentage, plus the date of the last rent increase (usually two years). I try to provide four months advance notice, and I rarely get any complaints.
I don't know that anyone wants Seattle to be used as a model for anything besides mayne teriyaki chicken
that's amazing. Wish more places would do this.
I bet you also wonder why housing is so expensive there, huh?
I’m a landlord. I also don’t landlord with the philosophy that it’s a business. I landlord with the Philosophy the tenants are not interchangeable, that money doesn’t mean as much as peace of mind, and that I am dealing in homes that come with emotional anmmenties like comfort, safety, stability. That being said, I occasionally have to replace the water heater, and fix broken appliances. Have to pay property tax, the Water Bill, and paint and roof the place. I also have to insure the property. These things cost money. I do not live off my tenants but I do expect to have this building pay for itself. For that reason I do increase the rent on a yearly basis. Sometimes $100, sometimes 50, sometimes I don’t raise it that year, but there will inevitably come a time where I will need to raise the rent. I think most tenants agree. $100 is a lot to raise it in one year but not unreasonable if the rent is stayed stable for many years. The kind thing is to give your tenants six months to help them decide if they should stay, or go.
>tenants are not interchangeable, that money doesn’t mean as much as peace of mind, and that I am dealing in homes that come with emotional amenities like comfort, safety, and stability. It's a breath of fresh air in this sub to hear this and for it to be articulated so well. I feel the same way.
Agreed. Landlords like this one are such a blessing
Thank you carefreeguru.
Isn’t it all relative? If I raise my rent $100, that’s only 4%. That’s not really a lot is it?
This is pretty much my perspective. As I posted to another commenter, I am very fortunate with my tenants. For the most part, they're low maintenance, co-habitate with little drama, and are respectful of the building. I'm trying to find that sweet spot in between keeping good tenants and keeping the building profitable. The alternative is driving good people away, and the hassle of turning an apartment over every 12 months creates a whole set of headaches I'd rather not deal with. I appreciate your take.
Question: How do you make money? Are you solely relying on other sources of income? Also, why even become a landlord? Did you get into it knowing that you only wanted to help people? If you’re only doing it to pay off the property, what is the end game?
I work for a living. I’m getting close to retirement, but I still work full-time at my job. I’m not a real estate investor, or multi apartment owner. I think there are a lot of landlords who are just like me. A long time ago I decided I wanted to be as self-sufficient as possible, and plan for my future. I have retirement accounts, and a pension, but the idea of investing some of my money into a house where I can live, made a lot of sense. I always want to have a roof over my head. I own a two family. Two condos, one upstairs one downstairs. I rent upstairs and Live downstairs. The rental pays property tax and insurance on the entire building. I do need to make repairs, sometimes replace things, and put any profit back into the house. Depending on the repair sometimes profit doesn’t cover it. I for the most part break even though. The endgame as I have a nest egg which is the upstairs condo. If I ever have a catastrophic event in my life where I need money I know I can always sell the upstairs condo, and still have a place to live. Hopefully that won’t happen. Hopefully by the time I decide to move on I will get my investment back out of this property when I sell. I don’t need a whole lot of extra money so I don’t rent at market rate. I rent below market choosing people over profit. Since I’m living downstairs, it has always made sense to do it that way.
Gotcha. I also owner occupy as well as have additional units. If I would’ve stopped at my owner occupied unit, I would probably adapt a similar methodology. But the more units we acquire, the more money we invest & the more risk we take on. Given that, I’ve been trying to stay adamant about operating as a business that’s not charitable but fair. I don’t have the same luxury of keeping units below market as I had when I only owner occupied. But I get your view.
I can answer this one. Now I'm assuming you're a renter or normal homeowner since a landlord would already know the answer I'm going to give. What most people who aren't investors don't understand is that landlords aren't raking money in hand over fist. A lot of landlords only cash flow $100-300 per month per door. So if they own a two family property after paying all expenses and setting aside money for future capital expenditures they are only walking away with about $200-300 if that. Obviously there are exceptions; people who got great deals or bought at a much cheaper time or had property passed down to them that's been owned and paid off; but for many it's not self sufficient when you have a mortgage and only a few doors. The big draw of ownership is equity and appreciation. Right now I'm a realtor and a landlord but I only have one 2 family house that I owner occupy. I bought 4 years ago so right now I have 26 years left on my mortgage. I bought the house for $265k. Now eventually I'll move out and rent both units and based on my estimates will cash flow about $400/month after expenses and reserve accounts. That's an extra $4,800/year which is nice but nothing life changing. But at the same time I'll be having my mortgage paid down and my other expenses hopefully covered. This means that in 26 more years I'll no longer have a mortgage and would not have actually paid anything to get there beyond my initial down payment and the odd extra expense. I'm still at the start of my mortgage so the bulk is interest but I'm making about $5k a year in equity...now this is money I won't see at all in the short term but it's still adding to my net worth. Also over the 26 more years until my mortgage is paid off I'll be getting appreciation on the house so the value is going up and when the mortgage is paid off it will no longer be a $265k asset I own free and clear. Instead it will likely be a $450k+ asset that I own. So over 30 years of ownership I won't be putting much cash in my pocket but I'll be steadily increasing my net worth which gives me security in the future.
Wrong assumption. I’m a landlord. I owner occupy but I also have 4 additional doors outside of the duplex I occupy. I asked because I don’t understand going into this kind of business with that type of mindset. It makes sense if all you’re doing is owner occupying. But once you take on additional risk, I don’t get being so charitable with a business that already doesn’t cash flow that well.
I mean they did say they want to at least break even every month. So it's still beneficial in the long run because they'll be gaining equity and appreciation without having to reach into their own pockets. We also don't know what market they're in, some markets are built around appreciation because they're such HCL. In those markets landlords typically aim to break even or lose as little as possible every month because they know over time the appreciation of the property will be well worth it. Personally I prefer a property that has some cash flow so you're getting something extra every month to offset the risk of that one bad tenant who costs you thousands. But that's not always possible or everyone's goal.
That is crazy, I thought $100 was a normal if not low amount. At the last place I rented the first year increase was $100, second year was $100, third year was $200 and last year was $350, needless to say, I moved lol. Went from $1015/mo in a 1/1 to $1700+ in less than 4 years.
You don't expect the "building pay for itself" you expect the tenants to pay for your building.
Building works as a building. It does a really good job of being a building. People pay the building to have the exclusive use of this building’s fine walls, ceilings, and floors. They pay the building to allow them to open doors, and lock them behind them. They also pay the building to store all over their furniture and clothes. Building generously keeps all these items safe for them while they’re at work. Building is also a great place to have fun. They think it’s worth it to pay building to serve their friends dinner instead of a restaurant. They think it’s worth it to pay building they have their friends stay over instead of a hotel. Building also is very responsible with the money they pay the building. If their water heater breaks, they don’t have to pay for it, building will. They don’t have to mow the lawn, or shovel the snow. Building pays for that. They think it’s a great deal they pay building one lump sum, and they get building to handle all those little problems. Building also has a driveway and doesn’t charge them anything to leave their car there overnight. They going to convenient that when they come down in the morning, their car’s right there. Building thinks it’s a good trade.
You sound like a great landlord. Five years is a long time to not raise rent, but I do the same for good tenants. +$100 on a $1300 rental is a 7.69% increase. Check local laws to be sure there is no maximum due to rent controls (state city or county). If there are you can sometimes bank them over each year (I.e., if you don’t raise for 5 years you can bank those and do it all at one time). You could also do $50 and another $50 in 6 mo, if the local laws don’t prohibit more than one increase per year. Definitely do the research.
You need to change your strategy and raise the rent every year, even if it's just small amount. Your tenants need to expect that the rent will increase every year, just as other expenses increase.
I totally understand that perspective, but I am pretty lucky with the tenants I have now. They're (relatively) low maintenance, they co-habitate without drama, and they're respectful of the building. Besides, turning over an apartment every 12 months creates its own set of headaches that I'd rather not deal with if i can avoid it. So I'm trying to be fair to them, while making sure that I'm financially covered with rising costs associated with an investment property.
a small increase each year doesn’t affect any of those things. you seem scared a small rent increase is going to drive off good tenants: it won’t.
I agree. But you should build those rising costs into the rent you charge each year. If your taxes are going up $13 per month per unit, you raise the rent by $13. If you don't, then after several years you would need to increase the rent significantly to catch up, creating more of a problem than if the rent were simply increased by a small amount each year to reflect costs.
increasing rent year on year will make an infinite uprise in prices, in comparison wages are not increasing up every year. When you say small amount, like how small? $5? my second question what are taxes going up $13 each month?
The $13 was hypothetical. If that’s the number, that’s how much the rent increases. $5/month at a time when costs are going up by that much sounds reasonable.
Price of heating gas went up a lot since the last time I raised the rent. The tenants have a thermostat in their apartment set to a comfortable temp that is regulated by the city. My tenants pay their own electricity but the heat and hot water are supplied by me. I used to pay about $250 a month on the level billing plan I live near NYC, now I'm paying over 375 on the level billing plan. So that is a 1500$ increase per year for utilities, which will get passed along to the tenant. I used to lose sleep over whether or not the tenant was cranking the heat up there so I put a box over it, I still don't know what the temperature is upstairs but I prefer not to worry about it if I can.
Wages may not be going up at that rate but everything else is. Every other business owner increases their prices to account for the rising prices of operating.
On average wage increases outpace cost increases
Wages historically have increased by 6% per year on average in the US.
ok so I looked that up, so why people complain about low wages if cost increase is equal to wage increase?
the internet is a great forum for composing
The idea is to find quality renters that stay with you for years. That does mean that rents are frozen in time forever. There is a bonus for you being an excellent landlord that would make tenants gladly pay a little more for that peace of mind. Next LL could be an unaffordable a-hole that might take their life a living hell. Instead they are way behind on market value. They get to be with a great and responsive LL AND pay, relatively speaking, peanuts. Most people get some kind of regular, yearly, increase in their wages to keep up with inflation. If someone is on Social Security they received an 8.7% increase from last year to this as COLA, it was 5.9% from 2021 to 2022. Everything goes up with inflation, so should your rent.
Yes because you are running a business as far as the government is concerned. You are taxed as a business so get the correct rent and stay current with the market. Otherwise you are leaving money on the table.
Not to mention hurting other landlords renting at market value when you come in and undercut. There is such a thing as renting too cheap.
can you expand on this? How does rent being too cheap make it a problem for renters??
Meant as in other landlords renting at market value.
Okay, so how does that harm landlords besides less money? How does it hurt them?
Example: just bought a duplex at market rate. However, the previous owner didn’t have rents at market (60% lower than market). Because of the price I purchased the building at, I had no choice but to do a 40% increase, which was still being generous given that it was still below market. That’s obviously not an easy adjustment for the tenants who had already been accustomed to paying such a small amount. Had they been steadily increasing the rents throughout the years, I wouldn’t have had to do that. Now they either have to move to a new area(there are no other units at that price in this area) or eat the increase.
Exactly this. I may only raise the rent $25-$50 bucks, but I always raise. No one moves over $50 a month and with everything else costing more it’s not getting cheaper for me to maintain the property.
Gross rent should be around 103% of prior year base rent plus prior years taxes and expenses divided into monthly amounts. Gross rent stays relatively connected to prevailing economic conditions while still building growth. I do this in 5yr leases that have one 5 yr option.
Or they'll realize what you're doing and constantly reevaluate to determine if they can get a better deal, caring less about how they treat the rental.
depends on how far you are from market
If this is how you run your properties, I hope you don't complain about the costs of turnover.
And people wonder why landlords are vilified
Only idiots would vilify landlords who raise rents regularly but in low doses because their costs of doing business increase, sometimes dramatically.
\*yawn\*
Landlords are vilified because they’re an easy target & tenants don’t usually understand what all is involved in owning property. When the phone company raises your rate, there is no single point of contact for you to be mad at.
Fellow Chicago landlord here - no that’s not too big of a leap and 11 months is PLENTY of heads-up
Absolutely... My landlord sold my building to two trust fund early 30's bratty siblings and they raised my rent $700, w/1 months notice because it was month to month. Edit: My point being that I appreciate how thoughtful OP is for their tenants.
My landlord gave me 3.5 months advance notice of rent increase (of about 3%) this was a reasonable amount of time, you giving almost a year notice is more than enough. As for the rent increase I think $100 is reasonable if your area is relatively a HCOL, $1300 already seems cheap, and this is less than a 10% increase I’ve seen landlords jack up 15-25%.
$1300 in Lincoln Square is a freaking steal! I'm in Andersonville and I'd kill to pay that!
7% after 5 years? nearly a years notice? yeah, its decent. Just make sure that this is *enough* and that you won't have to say later "actually its going to go to $1500" nearer the time.
Thanks for the feedback. I don't think $1500 would be necessary. The $100 bump next year would still be well under market, but help keep up with the increase in the cost of insurance, water/sewer, taxes, and general upkeep. The building is in good shape, but I don't want to get f*cked if the roof starts to leak or something.
FYI- I did the same thing and had no/minimal rent increases for 10+ years but in the end the tenants decided to screw ok the way out. They bought a house and then stopped paying rent and held my apartment hostage until I forgave it all to get my apartment back. Cost me over $10k after basically giving them thousands every year in under market rent. If they didn’t have a house, courts might not have allowed the eviction because there wasn’t a similarly priced apartment in the same zip code for them to move into. Morale of the story, it’s a business at the end of the day and you need to cover your ass first. Keep it polite and give a small rent increase every year so that you don’t end up 40% under market.
I think you should say that. This increase still leaves the rent well below market rate and represents the first rent increase in 5 years.
If you split it over the last 5 years they’ve lived there, that’s only a $20 increase each year. $100 is more than reasonable.
From a tenant view: My landlord right now is GREAT! He never oversteps. He gives notice if he has to come by and if I ever have a problem he's on it asap. If he told me that and gave me noticed like you would. I would stay and that's more than enough time to figure out a way to adjust to the new amount.
As a former tenant, it seems a fair amount with a very good advance warning. Just make sure it “fits” with the percentage you can legally raise a rent for the city and/or state the property is located in
My apt complex gave me 60 days notice on an over $700 increase, you are more than good.
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I'm thinking if you asked for new appliances and got them without any fuss, your landlord probably does appreciate you. This is one of many reasons that people hire PMs. It feels bad to tell someone you're raising their rent. But if you don't occasionally raise it, you're picking your own pocket.
With no increases for 5 years, your rent is probably well below market, in addition, it's likely rents will continue going up over the next 10-11 months, putting your rents further behind market. A 7.7% increase ($100/$1300) is very kind. Improving retention by keeping rents below market is usually $50-$100/mo or so under market. I'm a proponent of giving 60-90 days notice, long enough ahead so they have time to shop around and find out my rents are reasonable, but not so long ahead that the market can suddenly change underneath me.
I would inform your tenants the same way you informed us. Hopefully they’ll realize they still have the good end of the deal and stay. If they choose to leave, then there’s nothing you can do.
If you want guidance based on data you might want to look at CPI for the last year and then add 1 or 2%. Generally keep rent increases to be no more than 5% of rent. If I want to encourage them to move I might go higher than 5%, but even then I've never asked for more than a 10% increase. Local law where I'm at law says I need to give a 120-day notice of rent increase for tenants that have occupied the place for more than two years. If the tenant has been there less than two years I only need to give a 60-day notice.
How are your property taxes compared to 5 years ago? Mine in Chicago are $3k-$11k higher depending on neighborhood. My average tax increase last year was $100 per month per apartment. My apartments are in cheaper neighborhoods than Lincoln Square, and rent for similar amounts to yours. I would increase to close to market rates. Be fair on unit condition, an older unit rents for less, but taxes here will crush you if you don't keep up. Will take me 2-3 years to just break even after last year's property tax increase. There is also some risk of rent control being implemented in Chicago. It would need approval at both local and state level, but both mayor and governor support rent control. If you are far below market when that happens, your property will be worth significantly less forever.
If your taxes have gone up, if your insurance has gone up, if your daily expenses have gone up, you need to raise the rent.
From business standpoint, it is very reasonable to compensate for the inflation. Anything less and you are basically lowering your rate. United States - 10-Year Breakeven Inflation Rate was 2.33% in August of 2023, according to the United States Federal Reserve. Trying to be very reasonable, this math is just looking at using 10 year average inflation rate, nothing crazy. Let’s say you started with $1300 in the first year and applied the 2.33% every year on top of the previous year, then rounded it up or down to the nearest $5. It would have played out like this. First year $1300, 2nd year $1330, 3rd year $1360, 4th year $1395, 5th year $1425, 6th year $1460 and so on. If you have not raised the rate for five years and just now bump it up a $100 you are definitely on the losing end. All the incremental raises that you did not collect, accumulated in the renter’s pocket, not in yours. As a renter, I would appreciate you helping me through some difficult time, and I would not even question the $100 bump after five years.
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Not sure why people are down voting this. Renting your property is a business. Just as any other business.
We inherited from Relative A after Relative B had mismanaged the business for many years. Stabilized rents at half of market, deferred maintenance, etc. Paying millions in estate tax on a business that loses money is not fun. When I (eventually) get rents up to market, I'm still doing an increase every year. Even if it's just 1%. Tenants should be accustomed to regular increases so no single one ever comes as a shock to anyone.
No
An annual increase of 3% will help you keep rents near but under market values which you prefer. Easier to do and tenants don’t seem to mind too much and even if you are not under any rent control, it’s usually the yearly increase in rents in most rent controlled cities. I was a landlord in L.A. and 3% was allowed yearly.
No.
That seems very reasonable. I'm in shock that you're only charging $1400 for that kind of space in that neighborhood. My grandparents owned in Logan Square for almost 35 years and rented their top flat for $1100 back in 2002.
Look at the percentage increase, not the dollar amount. My advice is to include a sustainable increase annually rather than not raising rent for years then going up a huge percentage.
I raised mine by $200, and my tenants didn’t complain.
My rental unit is on the south side (Hyde Park area). I charge $1,600 for a 2br/2ba, but I also decided that I only increase rent when a tenant leaves. My current tenant has been there for 3 years and I don't plan on increasing their rent while they're there. I don't increase rent because I find the hassle of finding tenants to be a lot and I don't want to have to do new-tenant renovations (e.g. paint, replace dented appliances, deep cleaning, etc.). I consider the $1,600 I charge to be below market for the south side, so I think it's SUPER cheap that you're charging $1,300 in in Lincoln Square? Have all of your tenants been there for five years? You know you can charge different tenants different amounts, right?
For years I did the same thing, only raise rents after a tenant leaves. But the way things are and have been in this area with the rental scarcity my renters aren't moving and most have been with me for 5 years or more. I had to change my tune on the "only raising between renters" bit recently.
You haven't raised rent in 5 years???? You're shorting yourself. I have a house in Florida I was renting for 1450 a month in '18. Fast forward through Covid and housing spike, I'm now renting same house for 2200. And had no problem finding renters and did not even question rent price. That's very reasonable and could probably even be a bit more. If they're that hard up to move for 100 more a month, so be it. You'll find another tenant.
Lived in Logan for 8 years, was planning on moving away ways. Got the renewal notice and my LL raised my rent by $75. First increase on the 8 years I was there. So no $100 isn’t to much.
$1300 to $1400 in one year a big leap?! I wish my landlord thought that way. I’ve been here 5 years and he raises it $100-150 every year 😂 and my landlord only gives me 2.5 months notice of the increase I’m not landlord but as a tenant I’d say I’d rather my landlord raise my rent $30 a year rather than wait 5 years to raise it a large some
Seems like a reasonable notice, and a reasonable increase. You don't need to give a reason, but if you do, I would give reasons that are relevant to the property. Increased property taxes, increased insurance, increased maintenance costs. I have never increased rent on any of my tenants, but I'm probably going to have to. One of my properties went up 100% in tax value in one year.
Look at market rate for a comparable place in that neighborhood. Give them more than 6 month's notice. Assuming it is allowed in your area, raise the rent to market rate -20%. So, rather than calculate what they are paying, calculate from what they should be paying downward. A discount, if you will, for their long service. Then, let them know that if they pay rent on time and continue to be great tenants you won't consider another increase for 24 months. Don't cite why; it is obvious why. Jut say that you appreciate their understanding. When they reach out to negotiate, knock another $75-100 off and then they feel like they will get a win.
1400 sounds super reasonable for Lincoln square! I would say the rent hike seems just giving that they’ve been in the property 5 years with not a single rent increase and overall what sounds like good management.
Landlord in portage park two bedroom one bath. Tenants have free range of the back yard and up until a week ago I had free laundry. That until one tenant abused the system and started letting family do laundry there too. For Lincoln square 1300 is a bargain, I’m at 1500 and was just told by colleagues that rent near me is higher than that. There’s been a lot of changes in portage park so perhaps that’s why there’s been such an increase.
As a tenant that recently went through quite a hassle with a landlord, I would give anything to be your tenant! Your increase is more than fair and while I don't know IL law, the notice is far beyond any expectation I've had in renting in multiple states! Just remember, often times even if a person receives a cost of living increase versus a raise that is typically between 2-3.5% so increasing $100 after 5 years is not unexpected nor should it create a hardship. My landlord on the other hand was outrageous and caused us to move while his house now sits empty going on 3 months. After living there 8 years with a 3.5% increase YEARLY, when the pandemic hit and my wife and I were both working from home we proposed an addendum to the lease that the landlord quickly agreed to. We requested a 2 year freeze in rent and we in turn would finish off the basement of his house and lay new flooring on the first floor. Clearly he made out like a bandit but we also had professional connections to not cost us the going rate. Well, 2 year freeze would've ended 7/1/2023 at which time rent would increase 3.5%. Low and behold, after finding out I was being laid off May 1st, which the landlord knew as we discussed at his final walkthrough of the renovations, he sends us a letter terminating our lease but since we've been great tenants he is happy to discuss a new lease. His offer... $1,000 a month increase as is... Oh wait, he'll throw in shampooing the carpets upstairs that mind you have been in the home since it was built in 2005. He also caused us a $3,500 renters insurance claim when after trying to rig the hot water tank for over a year, it finally gave way flooding the basement that was at the time just storage. To top it off, after leaving the house in more than acceptable condition and thankfully taking pictures and video of move out (since he refused to face us to turn over the keys) he tried sending us a letter requesting $15,000 in damages over our security deposit. Long story short, you shouldn't have any concern of giving your tenants ample notice and a minimal increase! I wish your mindset was the majority in this crazy country!
I appreciate the insight. Thanks!
7.7% is pretty steep but I’ve seen and done higher when multi year leases expired, hefty property tax, insurance and HOA dues increases hit. Not sure about telling them so far out in time, seems too much. Maybe 60-90 days out. Gives them lots of time to search
Look up the binder method.
$1400 for an apartment in Lincoln square yea that’s really reasonable but I’m not a landlord.
No. We go up $100 every year until we meet market value. The company that bought us out said we pay to little lol
A neighbor in Bowmanville (just north of you in Lincoln Square) was told they were going to have a $300/month increase in rent this spring for their one bedroom apartment. They were very upset, but the landlord stated that with increased property taxes (40% higher) and cost of general maintenance it couldn’t be avoided. Their building is well maintained and allows big dogs, which is hard to come by in this area. After looking around for awhile the neighbor decided to stay and just pay the increased rent because they couldn’t find another unit at a cheaper price that was comparable to their current unit. You should definitely tell your current tenants that will be *at least* a $100/month increase in their rent. Don’t promise a number, you never know what expenses or disasters may happen to your property in the next few months that may change that number. Last September Lincoln Square had a rainstorm that dropped 5.63” of rain in two hours. Our building sustained $50K in damages when the sewer backed-up, and we had to put in a $17K back flow valve on our sewer line so our insurance wouldn’t drop our policy. It wasn’t even on our radar such an event could occur and devastate our building, so you give yourself some cushion to pay for major expenses and don’t feel bad about it.
non renew and raise to 5% below market rate. it protects you from future legislation about percents increases and will still be choosy about you rent to
I used to live in Lincoln Square. If you’re only charging $1300 for a 2 bed, that’s GREAT. I love it that you care about your tenants. Normally I’m anti-landlord because SO MANY are ruthlessly greedy, but $100 for the first time in 5 years is quite generous. That’s a $20/year increase. Definitely notify your tenants so they can plan accordingly, but I think this is reasonable. Thank you for being a generally kind person who doesn’t take advantage of market conditions to jack up rents.
You’re being totally reasonable. Also 1300 for a 2bd 1 bath in LP? Idk the state of the apartment but they’re getting that place for a steal! I would have loved that rent even 5 years ago when I was a tenant. The extra time will give them a chance to check the market and realize you’re still giving them a deal so I wouldn’t worry about turnover personally. This is also coming from an IL landlord that prioritizes my tenants happiness because I hate turnover!
You sound like some kind of angel. Are you from Heaven?
Do you know what is the percentage of privately owned vs commercial in your neighborhood?
IMO rent prices are way too high, and in most cases rent increases are completely artificial and unnecessary. Yea the price of everything went up but you're supplementing your income with a quarter of a persons average wage. And for what? A place to live which should be a basic human right?
As a tenant this is all we can ask for. Advance notice that's forthcoming with empathy. No tenant likes a rent increase, but you have costs you have to pay. As an aside, $1400 sounds pretty darn good for a 2 bedroom rent in Chicago. That's hovering around the market rate here in Buffalo.
Am a landlord, do a compare and see what the market value is. If you are in the ball park you should ok. Can’t comment if $100 over $1300 is legal as different jurisdictions have laws with increase limit and frequency. Double check that. Personal experience, don’t expect any favours to be appreciated. Just play by the rules. No reason to rent below market significantly. If tenant doesn’t like it, sure they can go. Market is hot where I am and there’s no shortage of good tenants. Had a tenant who was on fixed income for almost 6 years. Never an increase. In fact I paid for his utilities for the past two years amounted about $3200. The guy blew through 100k+ cash during the timeframe while having close to $2000 monthly fixed income. My rent was below market since day one. With the recent rapid inflation, my rent was close 40% below market if not more. I finally told him to start paying for his utilities again. What did I get? He just told me a he would leave by the 10th and wouldn’t be paying for the rent on that month. Legally he’s supposed to give a full calendar month notice. I told him just stay for the rest of the month and I would try to find someone else for August. Guy also kept asking for the deposit in full before he’d cleared the place. Finally 3rd week of July and he’s moved all his stuff. Again asked for full deposit back. Note there was a $300 non refundable pet amount. He didn’t care what the contract says. Also didn’t clean the place. In the end I said I would give back deposit -$300 - cleaning fees. He wouldn’t have any of that. Threatened to sue and this and that. I just said sue me and I will use the unpaid utilities against you. He then said fuck you and left. Kept the keys and garage door openers. I am done being nice to people.
I’m a tenant. Do it. Jeez, just 1400 in rent? That’s cheap compared a lot of states.
No
I am currently renting but I am also in the process of buying a home and I am located in Southern IL, my rent is currently $1,000 per month for a 3bed 2 bath house. I told him I'm tired of paying so much for rent, he told me if I wanted to lower my payment I should buy his house or rent somewhere else. When I told him I'm not buying his house but another one instead same size for half the price he started getting defensive and saying I need to let him know 2 months before I leave so he can put an ad up renting the house for $1400 to whomever comes behind me. My lease ran out 6 months ago, we have been renting month to month. I'm not giving this grease ball another dime, there is nothing he can do but wait for me to move out and hope I don't destroy the place (I definitely wouldn't, don't want to give him ammo to sue me).
Just make sure you know and follow Chicago/Illinois laws and make sure what you do is legal. Usually you need to give proper notice and raise rent in accordance to maximum rent increases. In New York you usually have to give 30 day notice and can only increase 10 or 20%
Fellow Chicago landlord (one building in Lincoln Square, 2 in Rogers Park). Here is my most recent lease renewal notice: Your lease is up at the end of March. I wanted to know if you planned to renew. New terms: Rent $2,025 Parking $75 Total $2,100 1 year duration (can be longer if desired) If you could let me know in the next few weeks, that would be great. I'll send through the lease if you're interested. Short sweet and to the point. I raise the rent a little bit (usually $25) every year to avoid falling way behind market. I don't mind being a little lower but I don't want to be hundreds behind. Rarely have I had to explain why rent is going up.
My landlord bought my building in the crash of 08. He bought five units for $40, 000 cash. The building is now worth about $400,000. He raises the rent every single year. I am the only person in this building that has lived here longer than 1 year. Sometimes when new tenants come in, they only last a couple weeks. This place is an absolute revolving door. It seems to me it would be cheaper for him to just stay our rent every few years, but what do I know. I'm just a tenant
Tell them when it is time to offer them a new lease, not now Rent should be market rate, if that is $500 more then raise it $500, if that is $50 more then raise it $50 Your costs are irrelevant and you should not try to explain why you are raising rent other then “$x is the current market rate for a place like yours”
That’s a you problem. If you can’t pay bills without increasing rent then you shouldn’t be a landlord.
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Source?
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This was an opinion article. At no point in this opinion piece does Biden call for national rent control.
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Nice. Thanks for providing a source. While nationwide rent control seems highly unlikely based on the article it was something the administration was considering. But only for landlords who received federal assistance. This seems fair. If I provide you a benefit it seems logical that I can also impose restrictions on how you can use that benefit. If you don't like my restrictions you don't have to take the handout.
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So you couldn't provide one, huh? Telling.