I have been a rental property owner since 2019. From the beginning, I committed to being fair with my residents, allowing them to enjoy the property and the ability to renew as long as they were on time paying tenants. Each year, I would have a nominal increase so as not to disturb their cash flow and allow them to have peace in the stability of pricing for their largest expense. This was great for the residents but not so great for me.
You see, while I was keeping the rent steady, my expenses – property taxes, insurance, etc. – were increasing. This subjected me to a worse financial position each year. The second part of the problem is that I was not paying attention to market rates. After a few years of small increases, the current rents were well below the market. Once again, great for the residents but not wonderful for me, the investor who took on the risk of purchasing the asset.
So, this is when I realized it was time to reevaluate rent. After our current residents moved out, we were able to raise rent 32% to great tenants who had the means to afford it and were excited to rent. In fact, it appears that they will rent again next year, of course, this time with a modest increase.
The point here is being fair to residents is essential, but as investors we must also be fair to ourselves and not put ourselves in a detriment, or a position where we may not be able to afford to rent great properties to great tenants in the future.
As I told someone who wanted to get started in rental properties, let your rentals be a business (have high standards, stick to the lease terms and do not compromise expectations) and be generous with your wealth (give from your net income, give back to your residents for Christmas, etc.). This mindset has allowed both my tenants and my rental property business to flourish.
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Rodney Robinson II