- Salvatore Friscia.
- And I'm Elizabeth Friscia.
- And we're the owners
of San Diego Premier Property Management,
and tenantfinder.com.
And we want to thank you for joining us today.
- Thank you.
- If you're watching on the replay, we appreciate it.
And if you'd be so kind to just hit the like button.
And feel free to comment at any time,
we definitely want to interact with you.
And also, hit the share button.
You know, I just saw something earlier,
where somebody said, "Don't greedy, hit the share button.
"You never know who might need to hear what we have to say."
Elizabeth and I, we do Rent Time to give our expertise,
and offer some value.
And what we believe is in underserved segment
of the real estate market,
in terms of property management, rental properties,
rental income,
so we definitely want to try and bring value,
and help people,
'cause we know a lot of people have rental properties,
we know a lot of you know people who have rental properties.
So you never know who might need to hear this,
so definitely hit that share button,
we'd appreciate it.
Absolutely.
So Rent Time Episode Four.
- Mm-hmm, four.
- Yeah, four.
Sweet.
So we are going to take a little bit about, today,
raising the rent.
- What, what.
- Not raising the roof.
Raising the rent.
Raising the rent.
So yeah, it's a little uncomfortable of a subject,
but we're gonna dive into it a little bit,
and we'll touch base on the when, how, and why,
to raise the rent.
But before we do that,
I definitely want to share something with you.
It's regarding our company.
It's a little personal thing I want to share,
that, well, I'm proud of,
so I guess I'll share it with you.
So the San Diego Business Journal, which I have here,
is a fairly esteemed publication here in San Diego.
And last week, they came out with their top,
I believe it's top 25
residential property management companies in San Diego.
- Yes, it is. - 25.
You know, San Diego's probably three million plus people,
and there's hundreds of property management companies.
And well, we were fortunate enough
to be recognized.
- There we are. - Absolutely.
We were fortunate enough to be recognized.
Now, we came in at 21, which is good,
because, I'll tell you what,
52 million in shared owned assets under management,
20% year over year growth.
- It's awesome. - It is awesome.
- Exciting.
- But more importantly, what's awesome to me,
is that who we're competing against,
who we're mentioned with in this publication.
And that's hedge funds,
major, nationally recognized companies that own
30,000, 40,000 units in the Southwest, corporations.
And we're family-owned and operated.
And we're obviously doing something right.
Because we're not competing with them
in terms of their marketing dollar,
but we're competing with them in a way
that resonates with you,
our owners, our vendors,
our referring agents, our supporters.
And we appreciate that.
So thank you for allowing us to be recognized
in the San Diego Business Journal,
because I'm proud of it.
And our trajectory is up.
- It's exciting to-- - It is exciting.
- See us in there. - It is exciting.
- And to know that we're up there against,
like you're saying,
all those big, huge conglomerate management companies.
- Exactly.
- It's a little humbling.
It's fun.
So thank you.
- Yeah, absolutely.
Thank you.
Okay, so we want to get back to the subject,
raising rents.
So why the subject?
Why raising rents?
What do you think is the reason why?
I bet you know why,
and I'll dive into.
But what do you think is the reason why
we wanted to talk today about raising rents?
- Well, I think people are scared to raise rents,
maybe they don't know how to raise rents,
maybe they don't know the best way to go about it.
- All of those things are true.
But the one reason is mainly
because majority of the people who we contract with,
who come to us for management services,
who are looking for professional management services,
when we look at their property,
I'd say probably 80% of the time
their rental rate has not changed in X amount of years.
It's not anywhere near market.
So they set it and forgot it.
You know, the set it and forget it.
They set it and forgot it.
So back in the day, 2012, 2014--
- Even before that.
- Yeah, before that,
they set the rental rate,
and then that was it.
So they have tenants in their property
that are benefiting from this low rental rate,
and now they don't what to do,
because they've never had that conversation,
they've never engaged with their tenant
on what to do. - Maybe they're comfortable.
- Right, they're comfortable at where they are.
- They're comfortable.
They like the tenants.
- Absolutely.
So to the when, the why, and the how.
So the when on raising the rent on your property.
What we do here is a strategy that I've had in place
for over a decade,
and that is, every year we train our tenants
to expect a rental rate increase.
Every year.
And when I tell people this,
sometimes they're like,
"Wow, you guys--"
- Shocked.
- "Militant, that's crazy."
- "I can't believe you do that."
- And we do it in a way that the tenants
understand it's coming,
the tenants actually are appreciative of it,
because they know in return,
they're getting a great place to live.
They're getting a property that's well taken care of,
and they're getting a property that's going to better
than the alternative.
And what we do,
is every year, they get a rental rate increase,
and it can be in the form of,
what we like to say, a nuisance rental rate increase.
So it could be in the form of anywhere
between $15, $20, or $25.
And that rental rate increase,
which totals a $300 annual increase in your proceeds
from that property for the owner,
is just enough to let the tenant know
that that rental rate increase is coming,
but not enough to make them want to relocate,
not enough to make them want to spend the money
on a moving van, packing up all their stuff,
the headache and the time it takes
to go and find another property.
So that nuisance increase allows the owner of the property
to benefit, as well as keeping a good tenant in place,
and then, what we like to say,
is we like to train our tenants to expect
that rental rate increase from coming.
So the when, every year, right?
- Every year.
And those are not shocks.
If you don't raise rent for five years
because you're comfortable with the tenant,
you like their relationship,
everything is really good,
the property is in good condition,
then all of a sudden,
you realize that you're $500 under market,
and you want to raise the rent,
how do you think your tenant is going to respond to that?
- That's a shock to their wallet, absolutely.
- It's a shock to everything.
- To their psyche too. - Yeah, sure.
- Maybe they think, "Well, have I done something?
"Is this retaliatory?"
So it's not a good situation to let that build up,
and then hit them all at once, like you're saying,
with a large increase.
So every year that increase is actually better
for the overall, entire situation.
Would you agree?
- Absolutely.
And not only that,
but say you wanted to raise the rent
a little bit more one given year,
you'll have more flexibility to do that.
- And then that leads to just the how.
So a lot of people say,
"Well, it's an uncomfortable conversation.
"I don't want to have that conservation."
And I understand.
But there's a way to do it,
in the form of a written document,
that you want to notify the tenant.
And each stage has their different laws.
I'm gonna refer to here in California.
So if you wanted to raise the rent,
say, less than 10%,
you would notify them in writing,
with a 30-day notice of that rental rate increase
of up to 10%.
And then over 10%,
you would need to give them a 60-day notice.
Once again, both of those notices need to be in writing.
And check your local laws,
make sure that you're in compliance,
'cause you definitely don't wanna overstep those bounds.
But here in California,
that's the law in terms of raising the rent.
- Not to mention, it needs to be at the end of a lease term,
or outside of it,
it can't be while you're in a lease term--
- That's correct.
Absolutely.
And that's something I failed to mention on there.
So that's why we're saying,
we do one year lease agreements,
so that's why we refer to every year,
that we revisit that, and we increase that rent,
so that's why we do that.
And then the why,
so why should I increase,
"Salvatore, why should I increase the rent on this tenant?
"They're really good.
"We've had them for a long time.
"We're comfortable."
My favorite one we get is,
"Oh, they just love the property,
"and they take such good care of the property."
And I say, "Well, they should.
"That should be by default."
But the why is because every year all of our expenses go up.
So with our rental properties that we own,
as well as the ones that we manage,
every year, taxes go up a little bit,
the cost of owning the property increases.
If you have our services, and you're paying our fees,
sometimes our fees also go up,
and you need to offset that.
- Or if you have an HOA,
sometimes your HOA due just go up.
- I've never seen them go down.
- [Both] Nope.
- So as your fees as a rental property owner go up,
you need to pass that along,
and allow the tenant to share in that.
So in the commercial market they refer to the CPI Index,
they index the rental increase on a yearly basis
to the CPI Index.
We refer to it in a residential, more of nuisance,
as I mentioned earlier.
But there are reasons that you need to do this,
and those reasons, as I mentioned,
is because your costs go up,
and you need to offset that.
And then also, as I mentioned,
or as you mentioned earlier,
to avoid that shock.
Stay up to date with the market rental rates in your area,
so you avoid that shock,
you avoid having to drop
a $250 or $300 rental increase on somebody,
who could change their entire living situation,
and for 60 days, they're trying to figure out what to do.
That's uncomfortable for everybody involved.
- Absolutely.
So you don't want to have a vacancy either.
- That's true.
So you want to minimize your vacancy by,
and we always talk about this,
by managing your property like a business,
and attending to these things in a timely fashion.
So we've got the when, the how, and the why.
I think we've covered all three of those
on raising the rents.
It's not a negative thing, to raise your rent.
- Not at all.
- You have a rental property.
It is your small business, as I like to refer to it.
You need to run it properly.
You need to also offer a great place to live in return
for that high rental rate,
and that increasingly higher rental rate,
especially here in Southern California,
as the rental rates continue to go up and up.
Make sure you're taking care of that property.
Make sure that you're giving value
for all those rental increases,
so that you do have that tenant in there,
so that you do avoid loss of rental proceeds,
and that investment is actually working the way it should.
- Absolutely.
- Okay guys, so we hope you found value in that.
We definitely appreciate you watching.
Make sure to like, share, and comment.
We definitely want to hear from you.
Also, if you'd like to learn more about
our property management services,
please feel free to visit our website at sdpmanagement.com.
And let us know how we can help.
- Or Tenant Finder.
- Or tenantfinder.com.
And let us know how we can help.
And we appreciate you guys watching.
Thank you so much.
You guys have a great day.
- See you next episode.
- Next episode.
Thank you.
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