Topic: When you send out your lease renewal offers, what is too much for a monthly increase?

Curious...When you send out your lease renewal offers, what is too much for a monthly increase? Is a $1,000 increase per month too much? $500? $250? $50 per month? What are your thoughts?
After holding increases to a minimum for several years during the covid shutdowns, most management companies in Houston are offering 6%-14% increases.
I phrased the question using dollar amounts because, when you use a percentage, it does not sound like much; however, when you do the math, the actual numbers are pretty steep. Our company is very good to our residents and we keep increases within a very reasonable range. When I receive calls from prospects telling me about some of their rent increases, it blows me away.

I look at it more in terms of percentage increase. Our company opted for a conservative approach of 5-9%. In some cases, it's 20% less than market.

What market are you in that gave a $1,000 increase over the previous term?

Shady Morales lots of places in FL

Houston.

Shady Morales my biggest I gave was $700. Last April. South Florida

Is this a for real question? What market, current rents, market rents, comps, concessions, property quality, lease term, length of tenancy…

Chris Finetto If we hold our increases to 6%, we are still looking at $100-$430 per month.

Robert Hoop — Seriously, take as much as much as the market will allow. If you can get $1,000, take it. Keep in mind that you when circle back in a year, you’ll likely not get another $1,000. There’s no magic number or percentage. Also, check your comps. Guessing you’re new to this.Yes, there are some cities that restrict rent increases so check with your apartment association.

Rent controlled city..... 5% max.

Debbie Haskell where?

Jessica DeLano woodbridge.,nj

Pft. Whatever law limits. I'd go all they way to market if I could. But not over.

Typically 5% to 7% $1000 increase is insane unless you tore the whole place down and rebuilt brand new

Look at state law where you're at, is there a cap? look at the market, remember rates are coming down in most markets, the wise move would be 5 - 7 %, remember retention is the goal not chase them to your competitor. Also, it's cheaper to retain the resident than have a make-ready that may sit, rule of thumb is to spend 100 today and save a 1000 tomorrow

If someone is $1000 below asking (and you are achieving asking) they can take the increase or they can leave. Same with $500! Under that…. Depends on how many people you have below market and what velocity you can pre-lease at!

It depends on your state, as some of them have limits on annual increases. Many companies have policies that allow only a certain percentage increase. And just because you can raise the rent high doesn’t mean you should. Many (most) people have not had cost of living increases that would support such a dramatic increase. Resident retention is important, as is doing business in the right way.

Increases are all about how you “sell it”. Make sure what you’re asking for is competitive within your market and consider offering something as an incentive. Many people feel that a $200 increase is too much until they shop around and find other communities costing much more. Discuss the benefits of staying vs moving. It almost always costs more to move elsewhere.

We had an 89% retention rate at my property over the last 12 months. I am asking about the industry as a whole. Percentages sound small, but they translate into substantial increases.

Robert Hoop We’ve been pushing 15% increases on average. Some more, some less just depending on what they’re currently paying versus the new market rate. A few went from $995 to $1525

Stacey Pichette 15% doesn't make it sound so bad; however 15% would translate to monthly increases of $240 to $1,200 per month at my property. That's steep.

Robert Hoop 89% is way too high. That in and of itself shows rates at renewal were too low. Market rates probably the same. Low rates are very easy. Market rates require work. I’m guessing for some reason you are asked to make market rates.

We've been increasing to market rate, capped at $45/mo. over the winter months. We'll be pushing rents and raising the cap pretty soon though.

The reason why people are homeless.

Deirdre Nell Gaye corporate greed.

Brandon- maybe some companies but certainly not all. This is what happens when states don’t put in place proper rental assistance programs through a pandemic. Owners required to write off hundreds of thousands of dollars in rent to collect partial money owed with absolutely no type of help for owners themselves. This is a business and bills are NOT cheap. The writing has been on the wall for a long time. How else are they expected to “make up” for even a small portion of what they lost?

Emily Foster well I guess by putting it back on people already struggling to make ends meet. I understand what you are saying, but our government always fails us, so I don't think anyone was shocked by the rental assistance issue.

Brandon Payton no body wants to talk about this and relation to homelessness. It’s always other issues. In reality most people do not $6000/mo and have perfect credit. Idk how 18 year olds and people on SSI/Disability/fixed income can afford even most 1 bedrooms. People can’t eat because their entire paycheck is going toward rent. A person should only spend 30% of their income on housing and that is not the case. Teaching financial stability, investments, retirement in high schools is crucial going forward.

Deirdre Nell Gaye they only teach people to be good little worker bees in school. School doesn't actually prepare you for anything else.

Brandon Payton so true

Deirdre - I honestly don’t think that majority of our homeless crisis has anything to do with their rent increases. We have some other major issues to address, and it shouldn’t start with rent.

Depending on your market, $1,000 rent increases are begging for government overreach by implementing rent control. Be very careful.

Are you guys crazy? I manage a 55 and over complex. 98% of my Residents rely on social security. I feel bad uping their rents at all. This year, 4%.

Karen Woodson same, we did 4.9% to keep it below 5 so our Agency could approve without escalating up the chain.

All I've done in property management is affordable housing. Never seen an increase of more than $20-25. This is DMV area.

Market and comps should be looked at too.

Just ask a decent amount. What would YOU be ok paying… treat people how you’d want to be treated but also check comps and make sure you’re comparable.

Crystal Buchanan that’s not how the owners/investors see it! As property managers, we get hired and paid to represent the interests of the owners/investors. Within reason, of course.

Bekah I understand but at the same time you don’t want to screw yourself by having tons of move outs and spending lots of money on turns - kind of defeats the purpose. Especially when you end up not getting what you think you will be for those units after those tenants move out. Some learn the hard way.

If your owner says to increase 10%, and you disagree, go back to them with market data and plead your case. If they still insist and it backfires, that’s on them, not you. Your job is sprotected bc you tried to causation, but you followed their interest. However, if they find out that you’re not getting them the rates they could be getting, they’ll find another property manager who will. It’s a balance, for sure, but it’s gotta tip in their favor.

*caution

Bekah Therese yeah, we learned the hard way and now we’ve dropped down to a more comfortable percentage.

$1000, $500 ... these are crazy increases to me

These windows have passed. Trust the industry publications. We are on a rent decline. I don’t think $250 is out test but the days of $1,000 are gone

If you want close to zero renewal percentage then hand out those 14% increases. My recommendation is to push vacant units to market and moderate your renewals to the CPI in your area usually no more than 6% or so.

My property brings up to market value.

In order for them to get an apartment, they MUST make 3/4 times the rent. Some are barely making it. When we increase the rent, they no longer make 3/4 x the rent. Some people don’t get that pay increase from their employer. How do we expect them to afford to live

Anywhere from 2% - 6% is typically standard. You want to be at market, or slightly above if your product can support it. Check your comps, follow their lead. Due to fair housing, I wouldn’t phrase it as flat dollar amounts unless everyone is paying the exact same rent amount. A $1,000 per month increase to someone paying $1,800 per month is a very different increase than someone already paying $3,500 per month, where as a 6% increase across the board is treating each resident the same.

It’s all about the market, but there does come a point where you’ll turn over too much of the building. This is where understanding the objectives of the owner will come into play.

Keeping in mind if the apartment vacates you have vacant loss time , advertising cost and turn cost.

Depends can your current residents afford a $100-400 rental increase? By doing a large rental increase result in tenants giving notice, more evictions or just turning in keys with no notice? Does your apartment community offer the amenities and location that your comps offer to sustain high jumps? At the end of the day are you and the owners ready to have high turn over if you do a drastic rental increase on good paying tenants? If you answered no to any of these questions find a happy medium to reflect an increase and bring all new incoming tenants in at Market to reflect the type of property you are and to stay in line with NOI that shows gain. Trust me taking someone from $975 base to $1300 base results in turn over big time and can be stressful for all involved.

"Take as much as the market will allow"? That's inhumane. Our rent markets are ridiculous. People like you price people out of their homes. I go as low as our maintenance needs will allow. And the owners of the complex I manage don't disagree.