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Thread: Rent increase - how to communicate to tenant

  1. #1
    SunnyC is offline Junior Member
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    Default Rent increase - how to communicate to tenant

    Hey Guys

    I am looking for some assistance with rent increase.

    1) How much should you increase your rent on a yearly basis?
    2) How do you communicate this to the tenant, phone, letter, both?
    3) If a tenant questions you, how should you explain to them the reasoning of the increase?
    4) Can you expect tenant to move out, or threaten you of a move out....how should you deal with this?

    Thanks in advance, any and all help will be greatly appreciated.

    -S

  2. #2
    jackflaming is offline Junior Member
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    Default Re: Rent increase - how to communicate to tenant

    How much rent you can increase depends on the quality of your services. I do not increase rent at my self storage on annual basis rather I make increment if add some new service or facility. Still if you want to increase rent, you should inform your tenants by either calling them or by mailing them. If you are increasing rent, obviously there must be a reason, you can tell that reason to your tenant.


    _____________
    Storage Dublin

  3. #3
    MamaDuke's Avatar
    MamaDuke is offline Moderator
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    Default Re: Rent increase - how to communicate to tenant

    According to our contract, we must notify them in writing a minimum of 30 days prior to the increase. Our letter states that due to inflation, our operating costs have risen, etc.

    We will only increase a tenant once per year...or longer. Never more often than that. I can do up to 10%, but usually do around 5% then round to an even number.

    Occasionally, someone will complain, but not often. If they do, I will split the difference with them.

    Also, I only increase the rent on units in high demand with low availability. That way, if someone does move out, I know I can fill it right back up at the higher price.

    In May, I did 35 increases and no one complained and no one moved out. I will likely do another round of increases this month.
    MamaDuke

    The art of life is to know how to enjoy a little and to endure very much.

  4. #4
    Advantage IT's Avatar
    Advantage IT is offline Senior Member
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    Default Re: Rent increase - how to communicate to tenant

    This is the letter we use:

    Rental Rate Increase Notice


    Tenant <Tenant.Name> Notice Date <Date.Notice>
    Company <Tenant.CompName> Unit Number <Tenant.UnitName>
    Address <Tenant.StreetAddress1> <Tenant.StreetAddress2>
    <Tenant.City> <Tenant.Region> <Tenant.PostalCode>


    <TENANT.NAMEWITHSALUTATION>:

    Thank you for choosing <SITE.NAME> as your self storage provider. We work hard to provide our customers with quality service at an affordable cost. In spite of our efforts, operational costs continue to go up due to many factors. Some of these include increased energy costs, higher repair costs, vehicle maintenance and increased costs for liability insurance. New technology and procedures often improve the quality and speed at which we can operate, but also contribute to rising costs. Periodically, we have to adjust the amount we charge our customers to compensate for these increases.

    Many of you have been with us for several years and know that you have not seen an increase in a long time. This is because we have worked very hard to avoid passing our increased costs onto you.
    This letter is to serve as your thirty (30) day notice for a rental rate change on your unit noted above. Your monthly rent for the space will change to <Tenant.ScheduledMonthlyRate> per month. The new rate will be in effect starting with your payment due on or after <Tenant.ScheduledDate>.

    We truly value your business, and we hope you will continue to choose <SITE.NAME> to meet your self storage needs for years to come. Our commitment to you remains the same - to provide high quality storage and superior customer service at an affordable rate.

    If you have any questions, comments, or concerns, please feel free to contact us by phone at <SITE.PHONE> or by email at <SITE.EMAILADDRESS> .

    Thank you for your understanding in this matter.


    Sincerely,


    ___________________________________
    -Site Manager

    Dont' Worry about people moving out. They are going to complain and you just have to soothe their fears. I have done done 160 rate increase over the last 5 months. I have split the increase 50/50 with 8 tenants and only had 4 move out because of the rate increase. Don't fret. All the studies show that you can do an increase for new tenants @ 5 months and exsisting tenants every 9 months @ up to 7% with no detriment to the facillity. This is what we have been doing with very little resistance. Good Luck!
    geraldine1051 likes this.
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  5. #5
    Gina6k's Avatar
    Gina6k is offline Moderator
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    Default Re: Rent increase - how to communicate to tenant

    Sunny C - We did a substantial rent increase in April, the largest I've ever done in two decades in SS. We had a few tenants downsize but only two moved out citing the rent increase. The kicker is, they had already given us a notice to vacate prior to getting the increase notice. Advantage IT gave you a great letter to base yours on and yes, we must notify our tenants in writing 30 days in advance just like MamaDuke.

    Annually, as demand flows or however you choose to operate your property is up to your resilience and gut instincts. The best method is number crunching... if you raise the rents X amount, say 5% across the board and you lose 1% of your customers (based on customer, number of units or square footage) would you still come out with the upper hand and increased profits? If the answer is yes, you have the basis for a rent increase. Standards used to suggest a 5% annual increase, that's reasonable for some properties, for others it is absurd. It all boils down to the concept we learned in school of supply and demand.

    For the more timid, some raise "street rates" as a particular sized unit is in higher demand. Then if the market bears that increase, they will then increase the existing customers in that same size unit to the street rate. Whatever you decide to do, just make sure you put a nice letter in with the rent increase notice. It truly does help soften the blow a bit and if your customers really like your place, you'll do okay. Everyone knows the cost of everything has risen in the past few years so stating you tried to stave off the rent increase for as long as possible but now find it necessary to increase a bit should be understandable to most people. Best wishes and let us know if you decide to raise rates and how your tenants receive the news.
    geraldine1051 likes this.
    Gina 6k
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    I am not an attorney, just an experienced manager who is willing to share what I have learned. Your thoughts, practices or opinions may vary and neither of us may be right.

  6. #6
    SunnyC is offline Junior Member
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    Default Re: Rent increase - how to communicate to tenant

    Thanks for the help and guidance.....much appreciated! GREAT feedback from my very first post

  7. #7
    ghostymosty is offline Member
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    Default Re: Rent increase - how to communicate to tenant

    You never know how the tenants will react to rent increases, just did one for July and am dealing with the mass exodus from the property. The nearly full facility will still have an occupancy percentage higher than the industry norm around here but the repercussions from ex-tenant word of mouth may keep potential new tenants from coming to the property.
    The one I have trouble understanding is when rent increases keep getting added each year for existing tenants and after a few years they are paying 50% more than a new tenant would for the same size space; and the corporation won't consider lowering rent unless the tenant moves from that unit to a different unit. The end result is usually that a good tenant leaves and the rent on the unit they vacated is now down to the new tenant price and nothing coming in until the space is rented again. Makes lots of sense to me, NOT!

  8. #8
    Lisa T's Avatar
    Lisa T is offline Senior Member
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    Default Re: Rent increase - how to communicate to tenant

    Quote Originally Posted by ghostymosty View Post
    You never know how the tenants will react to rent increases, just did one for July and am dealing with the mass exodus from the property. The nearly full facility will still have an occupancy percentage higher than the industry norm around here but the repercussions from ex-tenant word of mouth may keep potential new tenants from coming to the property.
    The one I have trouble understanding is when rent increases keep getting added each year for existing tenants and after a few years they are paying 50% more than a new tenant would for the same size space; and the corporation won't consider lowering rent unless the tenant moves from that unit to a different unit. The end result is usually that a good tenant leaves and the rent on the unit they vacated is now down to the new tenant price and nothing coming in until the space is rented again. Makes lots of sense to me, NOT!
    I got some vague idea of how that concept works when we worked in Florida. There was an Extra Space around the corner from us...and they raised rents several times a year on all tenants, no matter what the tenant was paying versus street rate for a new tenant.

    I'm sure they've done extensive number crunching that determines they make more money doing it that way.

    We had a pharmaceutical rep move to our facility who was renting a 5x10 climate from them, had started out paying $75 a month, and in a four short years was paying $235 for the unit.

    His employer put a stop to that and told him to move, so we rented him one for $85 a month. But think how much extra they made during the 4 years that the rent kept going up and he kept paying it? One must assume that there are many others who keep paying as the rent keeps increasing to justify them continuing to follow that plan. I think it's called the "Keep raising the rent til they move out" plan.

 

 
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