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As most of you know, Greg and I are the owners of two single family rental properties in Central Indiana. We have owned them since 2006, which means that we’ve been doing the whole landlord thing for quite a while. And although we have experienced our fair share of challenges, being a landlord has been fairly uneventful overall. Obviously, I would really like it to stay that way.
A few years ago, we were able to refinance our properties into two separate mortgages with lower interest rates. Because of that move, our properties should be paid off in a little less than 12 years. We’ll be 46-years-old then, and rolling in cash since our rental income will no longer go straight toward the mortgages on our properties. Our plan is to use most of those funds to pay for our children’s college education, then add it to our early retirement money pile. I cannot wait.
Landlord Confession: I Never Raise the Rent
Fortunately, the amount of rental income we earn should increase over the years. According to several media outlets, rents have been climbing all over the United States, including some areas in the Midwest where I live.
But I haven’t taken advantage of rising rents yet, nor do I plan to in the near future. Why? Because I have no plans to raise the rent on current tenants. Here’s why:
- I have good tenants- Finding good tenants for your property is not always easy, and excellent renters are the unicorns of the residential real estate world. I currently have decent renters in both of my properties and I want them to stay. Forever.
- I have limited free time- Vacancies are the most time consuming part of being a landlord. After all, when someone moves out, you typically need to clean and repaint everything then spend time finding a new tenant. With two small children, I would rather spend my time doing something else.
- Rent increases are unlikely to pay off anyway- Let’s say I raised the rent $50 for one of my properties and my current tenants moved out. I would then be forced to pay the mortgage myself for one month and spend a considerable amount of my free time cleaning the home and preparing it for the market. The extra $600 I would earn during the following 12 months is less than the mortgage on either property, and would be cancelled out by the one-month vacancy.
Will I Ever Raise the Rent?
Those are the main reasons I choose not to raise rents on current tenants, but I am not against raising rents as time goes on. My crazy brain actually thinks that raising the rent on new tenants is a much better deal than inching expenses up on people that already rent from us. That’s because, by raising rents in-between tenants, I can capitalize on the new income source without losing a valuable renter or causing any additional work on my end.
I’m also not against raising rents more often once we reach early retirement. Right now, we just don’t have the time to clean, paint, and seek out new renters every year, and would much rather let the current renters stay and get a good deal. We’re definitely giving up some cash for the privilege, but we currently feel that the trade-off is worth it.
As with most things, it’s not all about money. Time costs money too. And right now, I would rather spend my time taking care of my family and growing my business.
Landlords, how often do you raise rent? Renters, have you ever gone five years without a rent increase?