I’ve had my current tenant since I first decided to become a landlord and rent out my house two years ago. I did not take the proper steps of protecting myself by running a credit report on my tenant or verifying prior rental history. I had a couple of people interested, mostly college students from the local college, but decided to go with my current tenant. I had multiple conversations with her and I just had a gut feeling about her. So far, that gut feeling worked out to be correct and she has been a great tenant.
My tenant pays her rent on time. I’ve never had a bounced check from her and she doesn’t call me for minor repairs. I’ve never even had to respond to a “lockout” at 3am. Sometimes, I get so busy and I don’t realize that it is time to pick up the rent check and she will call me to remind me. Of course, part of it is probably because she doesn’t want to pay the $50 late fee but that’s ok with me.
I’m working on the new lease and I want to make an attempt to keep my current tenant for at least another two years. In today’s market, I could probably rent my home for about $1200. My current tenant is only paying $1000 which doesn’t quite cover the mortgage. I chose not to raise the rent last year in an effort to keep my tenant. This year, I’m going to give my tenant two options to stay. I’ve heard how hard it is being a landlord and some of the nightmare tenants. I’ve been able to avoid that and I want to continue not having to deal with crap like that.
Option 1:
If my tenant chooses to sign a one year lease, the rent will increase to $1100. I think this 10% increase is fair considering I did not increase the rent last year.
Option 2:
This is the least expensive option for the tenant and the best option for me. I’m offering to only increase the rent to $1050 if she chooses to sign a two year lease. This will pretty much guarantee I have a good paying tenant for the next two years and also give me time to get right-side-up on the home. By this time, I will have some equity in the home and the housing market will be in a lot better position.
My tenant has to let me which option she will choose by April 1st. Once I know her decision and have the signed lease in hand, I’ll let you guys know which option she chose.
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What a fantastic idea. You certainly do not want to risk losing your tennant - I know when my landlord hiked up my rent I started lookingf or a new place almost immediately.
Just a cultural sort of question here, as an Australian reader iut struck me strange that you deal directly with your tenant (drafting the lease, picking up the rent, dealing or the case may be not dealing with lock outs).
Is this standard in the American rental market? I ask only because it is exceptionally rare here for someone to deal directly with their landlord or tenant. Normally these sorts of things all go through a real estate agent. Not that it doesn't happen but for the most part you never hear it.
Great idea though, offering a discount for locking in. We resigned our lease for twelve months as our rent only went up by $6 a week whereas some people were experiencing rent increases of $10, $15 and even $30 a week!
[Unlike the US interest rates keep rising in Australia - they are at the highest they've been in a long time and it places stress on homeowners with mortgages, landlords with mortgages and tenants who have landlords with mortgages]
@fitcat: Basically, I choose to manage my property myself so I don't have to pay a management company. Since I only have 1 rental property, it doesn't take up too much of my time. If I had multiple properties, I probably would have someone manage it for me. Most property management companies charge about 5-10% of the montly rent.
Great idea, 2 options. A good tenant is hard to come by, if you can keep her, great.
If I were the tenant and because the market is soft, I'd ask you for a 2 year lease at $1000. Then I'd say I am signing a 2 year lease and I've been great.
Hope she takes you up with the raise in rent, but if not keep her anyway even if she doesn't want to pay the rent increase.
@fitcat: I prefer dealing with an individual and will go to great lenghts to rent from one such as SGM rather than deal with a faceless corporation. I live in a four-flat building, and my landlord is my upstairs neighbor. It's great. I am thankful that there are many places to rent in the US that require dealings with an individual. By the way, SGM, I no longer have a lease (my landlord likes and trusts me enough, I guess). I've lived there for about 5 1/2 years and have not had a lease for the past 3 1/2 years.
Hey, Single Guy - Have you done a market analysis lately in your area? Is your rent amount on par with what's available? If you're low, it would at least help you stand your ground in negotiations with the current tenant. You could say, "Well, $1100 is still very reasonable for what you'd find around here for this type of property. Check for yourself!" There's no reason you should be going negative cashflow wise every month on this house. You're basically paying to have her live there, unless you're doing well with the depreciation deduction and mortgage paydown.
@trisha: Per rentometer, the average in my area is $1100 and $1381 on the high end. Thanks for the great suggestion.
Wow! 10%! I know what I would tell you to do with that.
Plus, no way I sign a 2 year lease. Way to restricting.
However, most people are cattle, so you should be fine.
Anonymous... I guess it really comes down to individual preference doesn't it as I would much prefer to go through a real estate agent than an individual. I guess if there were ever any conflict or disagreement I feel like they would be able to manage the problem better as it is their expertise and they are less emotionally attached (not that all investors and landlords are emotionally attached). Ultimately we have a rental tribunal that we could approach though.
And I also much prefer having lease as it's give me a stronger legal footing and it also protects me from rent increases. But again, I imagine it comes down to individual preference. Maybe even some of it is a cultural diffrence. Thanks for the reply to my comment anyway, as I said to singleguymoney in another post, I love learning about these differences.
Do you offer any kind of frills with your rent? I am a good tenant and my landlady wanted to keep me when she moved, so she threw in free internet, cable and laundry. These things make a difference!
Hi there. Were I live one can only raise the rent so much a year. It is 4% a year. I do not know what the law is there.
@anonymous: I don't offer anything with the house besides lawncare.
@anonymous: I am not aware of any rent cap percentages in my area.
You are upside down on a rental property by $12,000. The rent doesn't even pay the mortgage (I REALLY hope when you say mortgage you are including taxes and insurance), let alone expenses on top of that.... Get out. Cut your losses, and get out!