Jason Hartman discusses how landlords can raise rent without losing tenants. Most institutional operators target 3-5% increases, and transparency about rising costs works better than surprise hikes. When a tenant leaves, new leases often allow bigger jumps, like the $300 raise Hartman achieved on a turnover.
Hey, so rent increases, an article that you brought to my attention is about rent hike transparencies or how to sell the increase. Your thoughts on this one?
Okay, and just a quick attribute to that one that's from multifamily executive and you know, we just like a broad source, a broad base of sources. So this is, you know, taking a perspective from big institutional, multifamily developers and operators and their thoughts on how to keep rent increases going. Most of them are looking for a 3 to 5% increase. And you know, it basically just comes down to you need to keep your properties in really good condition. You want to make sure that everything looks good, that they're very attractive. And you know, I think one thing that was interesting is some of the operators said, just be transparent about it. Go to your tenants, explain that your costs are going up. You know, utilities are going up, there's new taxes, there's other fees with owning properties. And just let them know that unfortunately you need to pass it on. And instead of trying to kind of warm it into, we're sending out the new lease in a month and, you know, trying to sneak in a rent increase there. So what do you think about that, Jason?
Right, right. Yeah, no, I think, I think that's true. And don't be too afraid of, I mean, this is a balance, okay? There's a fine line here in what I'm about to say. Don't be too terribly afraid of the tenant moving because when they do move, sometimes you can increase the rent a lot more. I remember I had this one property that I was self managing and the tenant moved out. And I remember at the time, you know, I just kind of didn't want to have a vacancy. Wasn't like business wasn't booming at the time. And I remember being a little bit, I don't know, a couple things that hit me in my financial life at that exact time. And I can't remember what they were, but you know, I was feeling kind of a little bit weak. I thought, oh God, now they're moving out on top of all this other stuff that's going on. And it turns out I got a new renter in three weeks and I raised the rent over $300. So a lot of times having the tenant move can be the best thing, but sometimes it's not. It depends. Every situation is different. But don't be too afraid of the moving number one. Number two is they expect rent increases, tenants expect this just like they expect pay increases, cost of living increases. People just, I don't even think most of the world has any concept of what inflation is or how inflation works, but they just think, oh, prices just go up because that's just what they do. It's like people just expect it. So don't worry too much about raising your rent. I mean, believe me, they're expecting it.
I think in the last podcast you mentioned people with a lot of equity tend to be lazy landlords.
Right, Right. They have lazy money. Exactly.
Yeah. If you're always going to be trying to. I don't say you want to push the envelope of rent prices, but if you want to keep the mindset that you're going to keep growing your rent in a reasonable manner, then you're going to have to make sure that you're not a lazy landlord. You need to monitor vacancies, see what's available in the inventory, look at what rents are doing in the market, and you want to just stay abreast of what's going on around your rental properties.
