Raise the rent and lose your good tenants?

Written by Marc on April 19th, 2007

Like many landlords, you are often faced with the predicament over raising the rent (because the market can support it) and losing some of your good tenants.

A good example is the rental market in Saskatoon at the moment.  Housing here has been a hot commodity over the last few years and there have been a lot of condo conversions resulting in a shortage of rental properties.

A certain rental community in our city named McNab park is a good example.  The majority of the tenants in this community are lower income families, with the average income just over half of the city of Saskatoon average.  Basically for these people, any major rental rate increase will drive some of them out.  With 163 units, it could be a huge cash cow in this type of market, where rental increases of $200 CDN or more are not unheard of.

I do realize most of you would consider jumping on the bandwagon and increasing the rent.  You should consider that if it was your rental property, your initial calculations should have put it as a positive cash flow property before you bought it.

So, as long as the property is bringing in money every month (positive cash flow), I would suggest keeping the good tenants.  Sure, you are missing out on some of the potential profit that could be in your pocket, but you are also missing out on the following things as well:

  • Higher vacancy rates due to higher rent
  • Increased number of problem tenants due to vacancies and new rentals.
  • Unpaid rents, renters leaving at night, etc.

So do some thoughtful analysis before you decide to raise the rents and lose some of your good tenants.

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