Say you have a great tenant that pays $1876 a month. Zillow and third-party sites estimate the market rent is $2000. So you send a renewal for the new rates. And the tenant decides not to renew.
Do two columns of math first.
Keep the tenant at $1,875: Twelve months at $1,875 is $22,500.
Push the tenant to $2,000, and she leaves: Say the unit sits empty for one month and cleaning and paint run $750. That’s about $2,550 all in, which is on the low side of the one to two months of rent range that a turnover commonly costs. Eleven months at $2,000 is $22,000. Minus the $750, that’s $21,250.
By the numbers: The tenant who stayed beats the stranger by $1,250 in year one. The higher rent needs 10 more months just to catch up, so it breaks even in month 22.
See here what other investors have to say about potential rents increases, the upside and the downside.