Yep. I have a secret. Something that I’ve never told anyone.
But I have to come clean.
What’s the secret?
Well, I have a tenant in one of my houses. They moved in right after I bought it in the fall of 2006. They’ve been with me now for seven and a half years.
The secret is that I haven’t raised their rent one dime since they’ve been living there.
That’s right – they’re paying the exact same rent that they were in October of 2006.
Shocking, right? Perhaps. But I couldn’t be happier!
Now I know what you’re thinking – that I’ve been leaving money on the table all these years, and that I’m a really bad property manager for not raising the rent, and so on and so on and so on.
But am I a bad property manager?
Let’s look at the situation piece by piece, shall we?
- They’ve been with me for 7.5 years
- They’ve never missed a month of rent
- They’ve only been late with their rent four times since they moved in
- They do all the minor maintenance on the house themselves
Pretty good story, right?
Yes, but it’s not enough to justify not raising the rent.
The real reason that I haven’t raised the rent is a little more involved.
You see, when I have a vacancy, I list the house for something above market rent to see if I can snag someone who will pay it. (If nobody bites I lower the advertised rent systematically until I get a tenant)
In this case, I listed the home before I closed on it, and snagged these tenants at a rent that was about $75 per month over market. There wasn’t a whole lot available at the time, and they really wanted to get into the school district.
So they took it.
And since then, the housing market has had it’s ups and downs. And while this particular area is a great place to live, a higher percentage of homes in the neighborhood are rentals now verses when I bought mine.
And greater supply means a lower price.
So while rents have risen in the area, because people are now putting granite counters in rental houses, my tenants could move tomorrow to another house within three blocks, pay the same rent, and get a nicer house than the one they’re renting from me.
So the question becomes, is it worth the risk to try for a $10 or $20 per month rent increase and risk having them move?
To me the answer is no.
If they move I’ll have vacancy time. I’ll have rehab expenses. And I’ll most likely rent the house at a lower rent than it is now.
See what I mean?
The bottom line is that it pays to know your area intimately. You need to know what’s happening. What’s on the market. How much the rest is renting for. What’s included. And how many rentals are in a two or three block radius.
Because a cookie cutter approach to managing rental houses just doesn’t work.
And don’t believe anyone that tells you that it does.
If you’re looking for more information on how to buy and own rental homes, check out my Single Family Rentals 101 program. It will teach you how to research your area and adjust your approach to what you find. Check it out here: Single Family Rentals 101.