Rent Increase

[TomD]

What is the name of your state (only U.S. law)? NJ

I have a townhouse in central NJ that I rent for $1,700 per month. The current tenant has been
with me for 2 years, and is up for a second renewal. There was no rent increase the first time they
renewed. This past year I had to replace the HVAC at a cost of approx $7,000. Given the above, and the
fact that the tenant is mostly likely benefiting financially from the new more efficient system, what
would be a reasonable and fair, if any, increase in the monthly rent? I know this is a subjective
thing, and I do have a number in mind... I'd just like to hear the opinion of others.

Thanks!

Tom

 

[Gail in Georgia]

This is not a legal question and frankly, it is unlikely your tenant would buy your argument that they benefit financially from a new, more efficient system.
I've put in four new ones in the past year and they haven't impressed any one of the applicants that have come to look at these places (or the current tenants) one bit. Since most renters have never had to purchase an HVAC themselves, they have no idea of the cost of such.

Most landlords decide on fair market rent based on the going rate for similar rental properties in similar neighborhoods. Toss in what your mortgage, taxes and insurance costs are and go from there.

Gail

 

[xylene]

Needing to conduct property maintenance, does not justify higher rent.

The market does.

The market rent for your property is set in comparison to the available set of rental properties.

Depending on you location in NJ, there may well be a market justification for a modest to healthy increase.

There are a variety of tools online to help you with that. You should be tracking your competition.

Toss in what your mortgage, taxes and insurance costs are and go from there.

That makes sense, of course, but in all fairness the market rent of a property does not begin at the point of landlord profitability. It would be nice if it always worked like that but a glut of rentals or other financial issues like mortgages and property value declines often make renting unprofitable

 

[FarmerJ]

The only tenant who would be impressed with a new heating system is the one who may have lived in a unit with a very very ancient heating system as in 65 % or so efficient or less, like old old gravity systems or furnaces from late 40s thru the 50s But thats gonna be a rare one at that since lots and lots of younger tenants haven`t a clue do what you must re how much you increase the rent and keep in mind that it can cause tenants to vote w feet and go elsewhere.

 

[MIRAKALES]

What is the name of your state (only U.S. law)? NJ
I have a townhouse in central NJ that I rent for $1,700 per month. The current tenant has been
with me for 2 years, and is up for a second renewal. There was no rent increase the first time they
renewed. This past year I had to replace the HVAC at a cost of approx $7,000. Given the above, and the
fact that the tenant is mostly likely benefiting financially from the new more efficient system, what
would be a reasonable and fair, if any, increase in the monthly rent? I know this is a subjective
thing, and I do have a number in mind... I'd just like to hear the opinion of others. Thanks! Tom

Most property owners (landlords) will consider the cost of premise maintenance into an annual rental increase only when the tenant has been responsible for the property damage or maintenance issues. The annual rent increase should be based on comparative fair market rental values for the region and should take into consideration the mortgage, property taxes and insurance, utility costs, etc. The cost of management should be factored into the initial rental costs regardless of specific needs for upgrades, such as the need to replace an HVAC unit or any other appliance, apparatus or fixture.