Raise the rent at renewal or keep a good tenant: the myths that cost owners money

Usually yes, and usually by less than you think

For a good tenant, the right renewal increase is usually a modest one that brings the rent to just under current market, based on homes that have actually leased nearby in the last few months. Holding the rent flat is sometimes right, but it is the exception. Pushing all the way to the top of the market can cost you more than it earns, because a turnover typically costs one to two months of rent once vacancy, make-ready and leasing are added up. The decision is a comparison between a known tenant at a slightly lower rent and an unknown one after an empty month.

At Perpetual Property Management we make this call for owners on every renewal, and the owner always has the final word. What follows is how we build the number, along with the beliefs about rent increases that I see cost owners the most.

Myth one: the biggest increase always earns the most

It feels like simple arithmetic: more rent is more money. It is, as long as the tenant stays. Our renewal guidance puts a typical turnover at one to two months of rent, or roughly $2,000 to $5,000 on a typical Tarrant County home, and that is before you count the risk that the next tenant is weaker than the one who left.

Here is the example we use with owners. Rent goes from $2,000 to $2,150. If the tenant stays, you gain $150 a month, or $1,800 over the year. If the increase pushes the tenant out and the house sits empty for one month with modest make-ready, you can lose more than that $1,800 before the new lease even starts, and the replacement tenant may pay the same $2,150 anyway. The bigger number only wins if the tenant renews.

And an empty month costs more than the missing rent. You pay the utilities, the lawn care and the mortgage with no rent coming in, the house carries more insurance and security exposure while nobody lives in it, and marketing and showings take time and money. Then comes the make-ready: paint, cleaning, carpet and the small repairs a departing tenant leaves behind.

None of these costs shows up when you send the renewal offer, which is why they are so easy to ignore. Put them on paper next to the extra rent a larger increase would bring. On most single-family homes, the comparison favors a fair increase that keeps a good tenant, not a maximum increase that tests whether they will leave.

Myth two: Texas caps how much you can raise the rent

Owners moving here from other states often assume there is a legal limit. Texas has no rent control, state law prevents cities from adopting it, and there is no statutory cap on renewal increases. The practical limits are the market and your lease. Some cities have rules on registration or inspections, but none of them set what you may charge at renewal.

The lease matters more than people expect. Rent generally cannot change in the middle of a fixed term unless the lease allows it, so increases take effect at renewal or with whatever notice the lease requires. Read your lease's renewal and notice terms before you plan the conversation, and if anything is unclear, ask a Texas real estate attorney rather than guessing. A renewal offer that arrives too late to give the notice the lease requires can force you to wait or to accept the old rent.

Myth three: raise it every single year, no matter what

Regular adjustment beats long silences. Small increases that track the market are easier for tenants to absorb and keep your rent close to where it should be. The opposite pattern, several flat years followed by a steep jump to catch up, is the one most likely to send a good tenant looking.

But regular does not mean automatic. In a flat or softening market, or when the lease ends in the slow season, holding the rent or making a smaller adjustment can be the better choice. Your own costs push the other way: Property taxes, insurance premiums and HOA dues rise over time, and the rent eventually has to follow. The right answer balances both, each year, with fresh numbers.

What goes into our renewal recommendation

Our recommendation is a comparison, not a formula. We look at homes of similar size, age, bedroom count, condition and location that have actually leased recently. Asking prices on listing sites are not evidence of market rent; they tell you what has not rented yet. The comparables give a market range for your house in its current condition, and the details of your house and your tenant place it within that range.

• Condition: dated finishes sit at the low end of the range, while fresh paint and a newer HVAC system support the top
• The tenant's record: on-time rent, early reporting of problems and good care of the home argue for a smaller increase
• Tenure: a tenant in a fourth year has absorbed several increases already, while a first-year tenant who signed near market needs only a small adjustment
• Your costs: property taxes, insurance and HOA dues
• Market direction: rising, flat or softening rents
• Season: a lease ending in the slow months argues for caution

Myth four: if the tenant pushes back, they are already gone

Pushback is normal and usually negotiable. We share the comparables and the reasoning with the tenant, which often settles it, because a tenant who can see three similar homes leasing for more understands the number. When there is still a gap, small concessions close most of them: a slightly lower figure, a repair the tenant has been asking for, or a longer term in exchange for a smaller increase.

You set the limit, and we will not go past it without your approval. If the tenant declines anyway, we start pre-leasing right away, with marketing beginning before the make-ready is finished, so the vacancy is measured in days rather than weeks. If it comes to a new tenant, screening deserves the same care as the first time; our guide to screening a tenant in Texas explains what that involves.

Myth five: your manager just wants the rent higher

It is a fair question. When the management fee is a percentage of rent, a higher rent raises the fee slightly. But the numbers run the other way for any manager paid on collected rent: an empty month earns nothing, so overpricing a renewal and losing the tenant is worse for the manager than a modest increase. In practice, a careful manager worries more about pricing too high than too low.

Ask how your manager's fee is calculated and what the renewal fee covers. Ours are listed in the written quote before you sign; on our plans the lease renewal fee is $149, $200 or $150 depending on the plan, as our breakdown of what a property manager costs, fee by fee shows. A renewal fee is reasonable only if it buys real work: a market analysis, a recommendation and a negotiation.

When letting the tenant go is the right decision

Not every tenant should be offered a renewal on easy terms. A tenant with repeated late payments, lease violations or compliance notices may justify a full-market increase, or a decision not to renew at all. In those cases the cost of turnover is the price of replacing a tenant who was already costing you money and time. Talk it through with your manager before the offer goes out, so the reasoning is on paper.

TexasLawHelp notes that a landlord can decline to renew a lease for most reasons, but not for discrimination or retaliation, and that a tenant can raise retaliation as a defense for six months after a protected activity. Make the decision on the documented record, the same way for every tenant, and give the notice your lease requires.

Start the conversation 60 to 90 days out

Timing is half of a good renewal. We start renewal conversations typically 60 to 90 days before the lease ends. That gives both outcomes room to play out: if the tenant renews, the paperwork is done calmly, and if the tenant is leaving, marketing can begin while they are still in the home. The written offer should reach the tenant well before the lease ends, with a response date and the reasoning behind the number.

Renewal season is also the right time to look at the house itself. A tenant is far more likely to stay in a home where the air conditioning was serviced before summer and the small repairs were handled promptly, so it pays to line the renewal up with the seasonal work in our guide to a year of upkeep on a North Texas rental house.

What a renewal looks like with us

Every renewal recommendation comes to you in writing before anything goes to the tenant. It includes the leased comparables, the market range, the tenant's payment and care record, an estimate of what a turnover would cost, and the proposed rent and term. You approve it, adjust it or decide to let the tenant go, and we handle the conversation, the negotiation and the paperwork from there.

We manage rentals in Keller, North Richland Hills, Fort Worth and across Tarrant County. If you self-manage and a renewal is coming up, ask for a free rental analysis; it gives you a rent range from leased comparables that you can use whether or not you hire us.

Questions people ask me