Monday, October 16, 2017

Rent Renewals

Who are my customers?

My customers are those who work or stay at home, professionals, moms, dads, families, kids, retirees, students, couples, tradesmen and women, experts and newbies. Some are shy and others are outgoing. Some are smiley and others reserved. Some always have ideas about what can be improved; while others like keeping things the way they are. Some are artists and others engineers by heart. Many have pets. All of them have their stories. And all of them love their home. 

One of the most crucial aspects of being a property owner is keeping great tenants happy and making sure that each house is someone's home.

Here by "home" I do NOT just mean "[noun] Where your wi-fi connects automatically". By home, I mean the place where you feel you belong and can always retreat to.


Should you increase rents every year?


I know annual rent increases may seem a logical and easy thing to do for most aspiring landlords. For me, it was the hardest task ever! I kept having an endless dialogue with myself about the pain that rent increase would cause my tenants. I also thought that low rent would help me keep good tenants because they'd feel good about having a house at a below market price. So I couldn't do it for months. 

Why do landlords fail?


At one time, when I was looking for a new rental property to buy, it finally struck me. I noticed that in many cases when a good deal comes along, I buy a house for cheap from a landlord who didn't make it. 

It suddenly became obvious to me that if rents haven't been increased for years, expenses still went up no matter what. The last time prices went down in Canada was in 1952

So poor landlord ends up with a property that causes serious continuous financial loses. Like many of us, he doesn't have deep enough pockets to re-adjust, so he is forced to sell for cheap.


Why do bad tenants stay and great tenants leave?


As I defined above, tenants are people. Life changes often and great tenants will likely leave at some
point because of a life event: marriage, graduation, job change, new hobby, moving out of town, found a better place, etc., etc., etc. You can't keep great tenants forever! But guess what?

If you never raise rents, your bad tenants will always stay. The simple reason is that the rent will become so unbelievably low relatively to everywhere else, that your bad tenants will never be able to find a new place to move to. No matter how you try to incentivize them, they will hang on forever.


How To Increase Rents Every Year

  1. Let your tenant know of an upcoming rent adjustment. The change must be in line with Ontario Landlord and Tenant Board guideline for the year. Note: you have to give 90 day notice.
  2. Provide some information about various relevant expenses that went up during the year. For example, property tax increases.
  3. Ask tenant to please let you know if the rent increase will cause them any financial hardship, so you can discuss.

Example (click on image to enlarge)

Here is a copy of a recent rent adjustment email and a tenant's response.




Follow Up Confirmation Letter

In a couple of weeks, send a confirmation rent adjustment letter and ask the tenant to sign it. I use DocuSign to get signatures online and usually receive a signed letter back very quickly.

Hope you found this article helpful. Please feel free to leave a comment below and share.  









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