How to increase rents without losing good tenants?

Are there any good tricks or advice about how to increase the rent amount on tenants who are exceptionally good tenants?

I’ve got some tenants in one of my properties that I really don’t want to lose, but they’re also paying rent that is severely under-market.

Part of me wants to just let them keep paying a low rent amount, but the businessman in me can’t get over the fact that I’m leaving serious money on the table each year and any other normal tenant in my market would gladly pay me a lot more for the same space.

What should I do? Should I bump up the rent or just let them stay put?

If I do increase the rent, is there a certain threshold by which I should do it? And is there a way I can explain the increase in a way that will prevent them from getting angry and moving out?

If anyone else has experience with this, I’d love to hear what has worked for you.

Hey @mattpayne you should check out the BiggerPockets podcast show #448. The guest, Dion Mcneeley, talks about how he uses his “binder strategy” to get tenants to sign longer leases with higher rents, they THEY suggest actually.

I was listening to that last night and it just blew my mind. Such a simple strategy - I can definitely see how it works! It was brilliant!

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@mattpayne I was looking at a property last year with a tenant who was paying about 50% of the market rate for rent. This was a good tenant as well (they were taking care of everything and were very hands-off) and I wasn’t in a hurry to lose them.

The deal fell through, so I can’t say for sure if this would have worked out in my favor… but if it had panned out, my plan was to increase their rent by 10% each year until they were paying full market rents, and I was going to be very forthright about it (not hiding the fact that their price was going up). It seemed like a good idea to me, but again, I can’t say for sure if it would’ve worked out the way I hoped.

Anyway, just one idea to consider.

@mattpayne I ran across this video the other day. It’s not talking about raising the price of rent exactly, but more about the concept of raising prices overall, which is something every business owner needs to think about.

You might find some useful ideas in terms of how to think through the issue.

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@retipsterseth those are some great points in that video. Liked and subscribed!