Posted by John on September 06, 2009 at 13:35:59:
You’ve obviously have not driven much in Jersey.
Best way to Increase Rents— Esp Sailor - Posted by Dan
Posted by Dan on August 10, 2009 at 11:25:22:
Looking for advise on when/how to raise slightly, 3-6%
the rents on a building that is $300-500 under market.
The building cash flows as is and I have done some needed repair work.
I want to go up a bit on rent, but not be greedy, to save for more repairs later on down the line.
Please advise.
Re: Best way to Increase Rents— Esp Sailor - Posted by Beachbum
Posted by Beachbum on August 10, 2009 at 22:47:37:
If all the units are that far under market, I would start by selecting either the worst tenants or the worst apartment and jack it to current rate. If they move, you upgrade the unit to clean and nice, then you will attract a better tenant at the market rate. Stagger your terms so they don’t all come up for renewal at the same time, or even during the worst time period for your market. Don’t offer multi-year terms, however- ALWAYS inspect as renewal time approaches, and use that opportunity to bemoan increased taxes, insurance, etc. to “prepare” the tenant for a reasonable increase, even if you are AT market. It’s rare for someone to move for a $10, $20, $30 increase as it will cost more than that TO move!
Re: Best way to Increase Rents— Esp Sailor - Posted by Sailor
Posted by Sailor on August 10, 2009 at 21:49:10:
The easiest ways to raise rents are (1) charge new rent to new tenants; (2) include automatic annual increases in rental agreements; (3) visit tenant in person to let him/her know your insurance & taxes have gone through the roof, so you have to increase rents, but since the tenant has been so good (or promises to be good in the future), you are only going to increase the monthly tab by X amount, even though your CPA is screaming you need to increase by 2X; (4) explain the dilemma of your increasing co$ts, but agree to delay the increase by 3-6 mo. if tenant agrees to automatic bank transfers.
The key is to make certain the tenant understands your situation, preferably in person, & then give him/her a “good deal” on the increase. A respected colleague never tells his tenants he is the owner instead of mgr, then he visits the tenant bearing the bad news of the increase dictated by the “absentee” owner. When the tenant complains on the spot about the increase, he says, “You know, I really like you, so let me talk to the owner on your behalf & see what I can do for you.” He comes back later & tells the tenant he got him a real deal, only half the previous increase. The tenant is tickled pink by the increase & feels the “mgr” is a real buddy.
Note that if you automatically raise rents on anniversary dates, the tenant becomes accustomed to annual increases. If you are an efficient landlord, not missing a small increase date, the amounts add up quickly & you won’t have to do big increases. Also, I like to state increases as percentages. A 3-5% increase doesn’t sound so bad, & remember that automatic raises like that compound, just like interest; e.g., 5% of $100 rent is $5, but the following year the new rent w/be 5% of $105.
Remember that tenants in 2009 are extremely price sensitive, & it won’t take much sticker shock to make them think about moving. Although I’m usually an annual rent raiser, I’m able to hold back this year because I’ve never let my rents go below high mkt. I’ve also been paying particular attention to tenant relations. Yes, the bad ones still skip after doing significant damage, but I’m keeping the good ones happy w/some small extras.
Let us know how you handle your situation–
Tye
Re: Best way to Increase Rents— Esp Sailor - Posted by Ken
Posted by Ken on August 10, 2009 at 20:05:27:
I would just raise the rents now all the way to full value
Re: Best way to Increase Rents— Esp Sailor - Posted by Kristine-CA
Posted by Kristine-CA on August 11, 2009 at 14:25:29:
Tye; thanks for the many good suggestions regarding talking to
tenants about rent increases.
However, am I the only one bothered by this strategy of lying to
tenants about being a manager instead of owner? It has come up with
several landlords I know, all who trained or studied with various gurus
and are all worked up about asset protection. I know no old-timer
landlord or investor who does this.
If a tenant pulled the same stunt, say using their mother as a job
reference, wouldn’t you feel lied to? Maybe their mother can really
vouch for their performance, but not telling you that their reference is
their mother would be a bummer, no?
I used to sell to one landlord buyer, who I don’t sell to anymore
because he pulled too many stunts regarding truthfulness. He was
always complaining about his tenants lying, their lack of
responsiveness, etc. But when he did the same things, and I (not very
diplomatically) pointed it out, he said yes, he did lie…but it was
different…and necessary. Sigh.
We can do better I think. Kristine
Re: Best way to Increase Rents— Esp Sailor - Posted by Ben T
Posted by Ben T on August 12, 2009 at 01:29:55:
I completely agree with you Kristine. To me lying about your
ownership status would be a sign of character weakness. Further, I
don’t get why you can’t negotiate with the tenant, while he knows
you’re the owner. Please! Another sign of weakness. Good post.
Ben
Re: Best way to Increase Rents— Esp Sailor - Posted by Kerry ( Ind )
Posted by Kerry ( Ind ) on August 11, 2009 at 19:15:48:
Kristine ,
No, you are not the only one bothered by the strategy of lying to tenants about being a manager instead of owner.
If you tell the tenant that you will put in a good word to the owner and try to get them a better deal, when in TRUTH you are the owner, you are not fibbing you are LYING !
Yes Kristine , we can do better, but only if honesty and character are more valuable to us than money .
If you want people to lie to you keep lying to others.You truly do reap what you sow .
Kerry
P.S. I have been a full time RE investor ,and landlord for nine years.
Increase Rents— KRISTINE-MANAGER VS OWNER - Posted by Jack-E
Posted by Jack-E on August 11, 2009 at 16:37:33:
Kristine. I think you may have a misguided sense of what is important and who needs to know what. The example you give about the mother is directly revelant to judging an application Telling your tenants or perspective tenants you are the manager, assuming you are, is not. Do they have any need to know you are the owner also, why? What good would it do them? You, in your manager capacity can handle any problem that arises. If they want to know who owns the property let them look it up on the county records. If a tenant or prospective tenant asks this type of question, I would be leery of them. Here is an old ( maybe too old ) time investor/landlord who never reveals his ownership. If you do you are only opening up yourself to possible situations you don’t want. Why do it? I have a son who sounds a lot like you. He has been diagnosed with what is called Scrupleosity. He feels it is his duty to tell anyone everything that there is to be known about any property and any possible problem no matter how minute. Its enough to drive you crazy. Lighten up! Go with the flow.
d
Re: Best way to Increase Rents— Esp Sailor - Posted by Sailor
Posted by Sailor on August 11, 2009 at 15:00:06:
I live in a rural county where there are NO secrets, & I am sure my tenants know more about me than I do about them (even though I check out their MySpace pages). I have never posed as anything other than the owner; however, in a more urban setting or with large holdings I might not feel compelled to spill my entire job description. I don’t know, 'cause I’ve never been in that situation. Using a spouse, an absentee partner, or an owner is a common negotiating technique–a simple version of Mutt n’Jeff. I’m kinda stringent about not fibbing, but I’m not certain explaining all my holdings to someone who has no right to the knowledge constitutes a whopper–
Tye
Re: Increase Rents— KRISTINE-MANAGER VS OWNER - Posted by Kristine-CA
Posted by Kristine-CA on August 11, 2009 at 22:02:02:
I’m pretty light actually. I’m California all the way when it comes to
mellow. That would be compared to my midwestern roots and my too
long of a stay in NYC before moving here.
It’s one thing to “manage” the property. But if I’m asked if I’m the
owner, I would never, and have never, said no. If that’s some condition
with symptoms and a diagnosis, sign me up.
I’ve worked for big players with millions (and one with billions) to lose.
They don’t play games with the truth when it comes to being owners.
They have other games that their lawyers play with entities and trusts
and corps. They are straight up in all business dealings, but if you try
to sue them, they’re (mostly) covered.
Re: Best way to Increase Rents— Esp Sailor - Posted by Kristine-CA
Posted by Kristine-CA on August 11, 2009 at 15:48:17:
Agreed about disclosing all of one’s holdings, no need for that as it’s
not necessary or a good idea. There are plenty of asset protection
strategies that don’t involve pretending to be someone we are not.
Although I know that the spouse/partner thing is a negotiating
technique that works, I’ve only used it once. My spouse/partner once
insisted that I call a buyer and add some terms to the deal. So when I
did I said that he made me call. It worked, but at least it was the truth.
Re: KRISTINE-MANAGER VS OWNER-TRUTH vs FICTION - Posted by Jack-E
Posted by Jack-E on August 12, 2009 at 16:36:16:
I don’t believe I adressed what you you would or should do if “asked” if you are the owner. If you have introduced yourself as the manager which you are, you are not likely to get that question. I have had it only once in 45 years. Although I am duly impressed with your million/billionaire players, I am willing to bet that they will tell you to disclose only what is necessary and be sure and do your due dilligence. I come from mid western roots myself and I, like you, probably grew up to trust everybody. That worked very well with other midwesterners, but as I found out with experience, not necessarily others. I don’t think we are far apart, we just differ on why and when it is necessary to disclose every thing we know. How much do you disclose to your renters?
Re: Increase Rents— KRISTINE-MANAGER VS OWNER - Posted by DJ-nyc
Posted by DJ-nyc on August 12, 2009 at 09:06:53:
“That would be compared to my midwestern roots and my too
long of a stay in NYC before moving here.”
Are you implying NYC is “stressful”?
DJ-nyc
If only… - Posted by Rick, the Probate Guy
Posted by Rick, the Probate Guy on August 11, 2009 at 18:40:56:
…you had a serious personality disorder, you could play ‘good cop, bad cop’ and not involve anyone else.
The ability to have a partner or another who’s interests and opinion need to be consulted prior to answering a query from a tenant, is a darn handy thing to have. I wish that I had such a person in my early days of rental because I was always an easy mark for a tenant getting their way. Now? Not so much.
Lots of people mistake honesty for condor or frankness and that seems to be reoccurring theme on this and other boards. Fortunately, I know you Kristine and have extremely high regard for you level of character. Of course, it may not be realistic to expect others will adhere to the same high level that you do. It would be ideal, but alas, not likely.
Lots of people only understand ‘cash register’ honesty; the type that means ‘don’t take money from the till that doesn’t belong to you.’ However, there’s lots of forms of dishonesty. I like my friend Ed’s definition: “Thought, word, act, deed or omission, with the intent to deceive.” Yep, that about covers it.
I’ve done that - Posted by Natalie-VA
Posted by Natalie-VA on August 11, 2009 at 18:17:14:
Yup, make my husband the bad guy when negotiating. I don’t make a habit of it, but it does work. I continue to be the good guy, but, you know, sometimes my hands are tied…
–Natalie
Re: KRISTINE-MANAGER VS OWNER-TRUTH vs FICTION - Posted by Jack-E
Posted by Jack-E on August 12, 2009 at 16:44:06:
This comment by Rick the Probate Guy about says it all. He in my opinion is one of the best poster’s on this site. In Reply to: Re: Best way to Increase Rents— Esp Sailor posted by Kristine-CA on August 11, 2009 at 15:48:17:
…you had a serious personality disorder, you could play ‘good cop, bad cop’ and not involve anyone else.
The ability to have a partner or another who’s interests and opinion need to be consulted prior to answering a query from a tenant, is a darn handy thing to have. I wish that I had such a person in my early days of rental because I was always an easy mark for a tenant getting their way. Now? Not so much.
Lots of people mistake honesty for condor or frankness and that seems to be reoccurring theme on this and other boards. Fortunately, I know you Kristine and have extremely high regard for you level of character. Of course, it may not be realistic to expect others will adhere to the same high level that you do. It would be ideal, but alas, not likely.
Lots of people only understand ‘cash register’ honesty; the type that means ‘don’t take money from the till that doesn’t belong to you.’ However, there’s lots of forms of dishonesty. I like my friend Ed’s definition: “Thought, word, act, deed or omission, with the intent to deceive.” Yep, that about covers it.
Re: Increase Rents— KRISTINE-MANAGER VS OWNER - Posted by Kristine-CA
Posted by Kristine-CA on August 12, 2009 at 11:01:18:
No, not stressful. But whatever the opposite of mellow is. Hyper?
It had to do with where I was in my life and my job (managing editor in
an educational publishing house). Definitely hyper. Southern Cal is a
blessed relief.
When I go back I become a different person the minute I hit the
airport. My friends and family let me do the all the talking and all the
negotiating in NYC.
Re: KRISTINE-MANAGER VS OWNER-TRUTH vs FICTION - Posted by Kristine-CA
Posted by Kristine-CA on August 12, 2009 at 18:16:37:
Does it say it all. Rick’s quote says “with intent to deceive.” Saying I’m
a manager when I’m not is with intent to deceive. So I don’t do it.
It’s really not that big of a deal. I always introduce myself as the new
owner to holdover tenants or owner to new tenants/applicants. When
I’ve used property managers, the applicants and tenants don’t get my
phone number and have to go through the manager. Sure, they could
sue me. Sure they could and have tried to intimidate me into believing
they could take me to court for this that and the other thing. Sure they
have sob stories. I fell for lots of BS in the beginning. None of it has
required to me say that which isn’t true.
I’m not naive. I have owned mostly horrible properties in horrible
neighborhoods. I have inherited some of the worst tenants in the
world, to be sure. I’m not an intentional landlord. I only keep
properties with tenants when I have to, two years being the max.
Some of the tenants were pretty saavy and knew all the tricks, some
were sue-happy. Whatever. It’s all in a day’s work whether I am the
manager or the owner. I’m good with my way of doing it. Do unto
others, ya know.
Re: Increase Rents— KRISTINE-MANAGER VS OWNER - Posted by DJ-nyc
Posted by DJ-nyc on August 12, 2009 at 11:51:59:
This is so true. Hyper, fast-paced, rat race it is for sure… I can definitely say its stressful…When I go to Jersey, I can feel the stress leave me as I ride over the George Washington Bridge… hahahaha
But, there’s no place like it… (Its a weird love-hate I have with nyc)
The ReInvesting is definitely - Difficult at best!
DJ-nyc