It really isn’t as bad as it was prior to the refinance. Still isn’t ideal, as you’d like to be making bigger deposits than you do expenses, but it isn’t the end of the world.

Thanks for stopping by, and like yourself, I find these topics very fascinating.

Personally I don’t think your negative cash flow situation is as bad as it seems. You are building equity each month right? Over time it will eventually break even (still building equity) and even be cash flow positive (and still building equity).

I don’t own real estate, but I do find discussions like this fascinating.

I completely agree that newer landlords will struggle with missing the rent (I’ve had vacancy before and it isn’t fun). Ultimately though the decision to bump it slightly isn’t intrusive, but also signals that you are comfortable continuing to raise the rent. Most of the goodwill issues could possibly be mitigated with responsive landlord-tenant interactions and consistent treatment the timing and payment of repairs and maintenance issues.

Love the analogy to stocks, where the more properties you have, the less a vacancy hit will be, therefore the more aggressive your pricing can be. However, the higher the rent on a property, the bigger the pain a vacancy can be. With one of your SF properties, although unlikely, if it were to sit vacant for a month while you tried to get maximize your rent, the vacancy cost would far exceed the incremental rent income in my opinion. Thus the question would be, is it better to consistently charge just under market rent and maintain that 100% occupancy? In my mind, more than likely. Ultimately it is just a personal management decision as each people have different risk tolerances.

Again, thank you for the great comment, and of course, thanks for the share and stopping by!

Thanks for stopping by RBD!

You’ll probably never find the correct answer, or consensus, since everyone’s situation is different.

What I’ve gathered, from personal experience and from networking with other investors, is that most new landlords are better served not raising rents annually. This takes into account for a cash flowing property, but the reason is when your first starting out, any missed payment is very likely a 100% vacancy situation. When your’re new, that’s a downright scary situation to face! I haven’t raised rents on any tenants yet, and the results have been great (so far). The first tenant has been in the property for over a year now, and doesn’t really bother me much for anything (knock on wood). She even renewed a 2 year lease!

For the right tenant, it can work out well. It’s kind of a give and take, respect thing. For tenant #1, she recently had a garage door problem. I took care of it, but when rent was due the following month, she deposited an extra $60. At first I was confused… but later realized she put in the extra funds to pay for the repairs herself. Who does that?!? I was blown away by that action (although I did refund her back), so for this tenant, there’s a good reason why I don’t want to raise rents. I collect back in other ways… mostly through 0% vacancy.

My plan is to get to 10 properties or so, and in the beginning the cash flow doesn’t have to be spectacular. I just need 0% vacancy, most importantly. Over time, when the portfolio grows, taking a vacancy hit won’t be so bad. It’s kind of like owning 40 stocks and seeing 1 company go belly up. At that time, I would probably start increasing rents more regularly.

Your situation is different though. Your property is cash flow negative, so that changes things greatly. In this case, I think your’re doing the right thing raising rent. You aren’t going overboard with the raise, but you’re also helping yourself chip away and get back to breaking even. 1.8% really isn’t that much, so you may be able to even get away with this annual increase without having to worry about tenant backlash.

Best of luck!

When I first started renting, I thought I was going to be in the boat of raising every year. However now, I really like my tenants and my cash flow is pretty good. Additionally, my condo has finally stopped raising the HOA every year and taxes are fairly flat. So at this point if I raise, it is to make more money. They are comfortable and seem to really like the place, so I expect them to stick around for at least another year. With that, I don’t think I’ll raise unless my taxes go up a lot.

-RBD