Every property owner faces the same question at lease renewal time: Should I raise the rent? And if so, by how much?
Raise it too much, and you lose a good tenant. Raise it too little, and you leave money on the table. Don’t raise it at all, and you fall behind market rate—making it harder to justify increases later.
So what’s the right number? How much is too much? And how do you balance maximizing revenue with keeping great tenants?
After 19 years of managing 250 properties in the Lansing tri-county area, I’ve seen every rent increase scenario play out. I’ve watched landlords lose excellent tenants over $50/ month increases. I’ve seen others successfully raise rent $200/month with zero pushback. The difference isn’t luck—it’s strategy.
This blog breaks down exactly how to approach annual rent increases: what’s reasonable, what’s risky, how to calculate the right number, and how to communicate increases without losing tenants.
The Big Picture: Why Rent Increases Matter
Rent increases aren’t optional—they’re essential to long-term profitability. Here’s why:
Inflation Erodes Your Real Income
Example: You rent a property for $1,200/month in 2020. Five years later, you’re still charging $1,200/month. But inflation averaged 4% per year.
Real purchasing power in 2025: $1,200 in 2020 = $984 in 2025 dollars. You’ve lost 18% of your income without realizing it.
Property expenses don’t freeze: – Property taxes: Up 3–5%/year – Insurance: Up 58%/year – Maintenance costs: Up 4–6%/year – Utilities (if you pay): Up 3–5%/year Contractor labor: Up 5–10%/year
If you don’t raise rent, your profit margin shrinks every year.
Market Rate Drift
Problem: If you don’t keep pace with market rate, you create a gap that’s hard to close later.
Example: – Year 1: Market rate = $1,200; you charge $1,200 – Year 2: Market rate = $1,250; you charge $1,200 (no increase) – Year 3: Market rate = $1,300; you charge $1,200 (still no increase) – Year 4: Market rate = $1,350; you charge $1,200 (now $150 below market)
Now you have two bad options: 1. Raise rent $150 all at once (tenant leaves; they’re shocked by the jump) 2. Keep rent at $1,200 (you’re leaving $1,800/year on the table)
Small, consistent increases prevent this problem.
Tenant Expectations
Reality: Tenants expect rent increases. It’s normal. What they don’t expect are unpredictable or excessive increases.
Tenant psychology: – $25–$50 increase: Expected, barely noticed – $75–$100 increase: Noticeable but acceptable if justified – $150+ increase: Shocking; triggers apartment hunting
Consistent, predictable increases build trust. Random, large increases destroy it.
The Data: What’s Normal in 2026?
Here’s what rent increases look like in the Lansing tri-county area in 2026, based on real market data.
Tri-County Average Rent Increases (2026)
Overall average: 2–4% year-over-year
By market segment: – Hot markets (Okemos, Haslett, Downtown Lansing): 3–5% Moderate markets (DeWitt, Holt, Grand Ledge): 2–4% – Soft markets (South/West Lansing, student housing): 0–3% By tenant type: – Families in good school districts: 3–5% (strong demand, low vacancy) – Young professionals: 3–5% (high demand, willing to pay for quality) Students: 0–2% (softening market, new supply) – Section 8: Limited by HUD FMR adjustments (typically 2–3%) – Working-class tenants: 0–3% (economic pressure, price-sensitive)
National context: – 2021–2022: 8–12% increases (hot market, post-pandemic surge) 2023: 5–7% increases (cooling but still strong) – 2024: 3–5% increases (normalization) 2025: 2–4% increases (stable, predictable growth)
What this means: The days of 8–10% annual increases are over. Landlords raising rent 5%+ in 2025 are facing higher turnover.
How Much Is Too Much? The Framework
Here’s how to calculate the right rent increase for your property.
Step 1: Know Your Market Rate
Action: Research what similar properties are renting for right now.
Where to look: – Zillow, Apartments.com, Craigslist (active listings) – AppFolio, property management company websites (actual rents) – Local property managers (market intelligence)
What to compare: – Same neighborhood – Same bedroom/bathroom count – Similar square footage – Similar condition (updated vs. dated) – Similar amenities (parking, laundry, yard, etc.)
Example: – Your property: 3-bed/2-bath in Okemos, 1,400 sq ft, updated kitchen, 2-car garage – Current rent: $1,500/month – Market comps: $1,550–$1,650/month – Market rate: $1,600/month (midpoint) – Your gap: $100/month below market
Conclusion: You have room to increase rent.
Step 2: Calculate the Percentage Increase
Formula: (New Rent – Current Rent) ÷ Current Rent × 100 Example scenarios:
Scenario A: Small Increase – Current rent: $1,200 – New rent: $1,250 – Increase: $50/ month – Percentage: 4.2%
Scenario B: Moderate Increase – Current rent: $1,200 – New rent: $1,300 – Increase: $100/month – Percentage: 8.3%
Scenario C: Large Increase – Current rent: $1,200 – New rent: $1,400 – Increase: $200/month – Percentage: 16.7%
Rule of thumb: – 0–3%: Safe; minimal tenant pushback – 3–5%: Reasonable; some tenants may negotiate – 5–8%: Aggressive; expect 10–20% to move – 8%+: Very aggressive; expect 30–50% to move
Step 3: Factor in Tenant Quality
Not all tenants are equal. Tenant quality should influence your increase strategy. High-Value Tenant (keep at almost any cost): – Pays on time every month (zero late payments) – Takes excellent care of property – No complaints, no drama – Long-term (3+ years) – Low maintenance requests
Strategy: Keep increase minimal (0–3%) or match inflation. Losing this tenant costs you more than the extra $50/month.
Average Tenant (standard increase): – Pays on time most months (occasional late payment) – Maintains property adequately – Reasonable maintenance requests – 1–3 years tenure
Strategy: Standard market increase (3–5%). If they leave, you can replace them without major loss.
Problem Tenant (increase aggressively or non-renew): – Frequent late payments Property damage or neglect – Excessive complaints or maintenance requests – Lease violations
Strategy: Aggressive increase (8%+) or non-renewal. If they leave, you’re better off. If they stay, you’re compensated for the hassle.
Step 4: Calculate Turnover Cost
Turnover is expensive. Factor this into your decision. Average turnover cost (tri-county area): – Vacancy: 2–4 weeks = $600–$1,200 lost rent – Cleaning/repairs: $300–$800 – Marketing: $0–$200 (if you self-manage) Tenant placement: $0 (if you self-manage) or 50–100% of one month’s rent (if you use a PM) – Inspection/turnover labor: $100–$300
Total turnover cost: $1,000–$2,500 (average: $1,500) Break-even analysis:
Scenario A: Keep tenant, small increase – Current rent: $1,200/month – New rent: $1,250/month (+$50) – Annual gain: $600 – Turnover cost avoided: $1,500 – Net benefit: $2,100
Scenario B: Raise rent aggressively, tenant leaves – Current rent: $1,200/month Attempted new rent: $1,400/month (+$200) – Tenant leaves – Turnover cost: $1,500 New tenant rents at $1,400/month – Annual gain: $2,400 – Net benefit: $900 (after turnover cost)
Scenario C: Don’t raise rent, keep tenant – Current rent: $1,200/month – New rent: $1,200/month (no increase) – Annual gain: $0 – Turnover cost avoided: $1,500 – Net benefit: $1,500 (compared to losing tenant)
Conclusion: Small increases that retain tenants often beat aggressive increases that cause turnover.
Step 5: Consider Tenant Tenure
How long has the tenant been there? Tenure matters.
Year 1 renewal: – Tenant is still settling in – Relationship is new – Recommendation: Small increase (2–4%) or match inflation
Years 2–3 renewal: – Tenant is established – You know their quality Recommendation: Standard increase (3–5%)
Years 4–7 renewal: – Long-term tenant; high value – Turnover would be costly Recommendation: Minimal increase (2–3%) to retain
Years 8+ renewal: – Extremely valuable tenant – Replacement risk is high Recommendation: Match inflation (2–3%) or skip increase every other year
Why tenure matters: Long-term tenants are gold. They know the property, maintain it well, and rarely cause problems. Losing a 7-year tenant over $50/month is a bad trade.
The 2025 Rent Increase Decision Tree
Use this framework to determine your increase amount.
Question 1: Are you below market rate?
Yes (10%+ below market): – Action: Increase to close the gap, but do it in stages Year 1: Increase 5–8% – Year 2: Increase another 3–5% – Goal: Reach market rate within 2–3 years
No (within 5% of market rate): – Action: Match inflation or market growth (2–4%)
Question 2: Is this a high-value tenant?
Yes (pays on time, low maintenance, long-term): – Action: Minimal increase (2–3%) or skip every other year – Goal: Retain at almost any cost
No (average or problem tenant): – Action: Standard or aggressive increase (4–8%) Goal: Maximize revenue or encourage turnover
Question 3: What’s your market condition?
Hot market (low vacancy, high demand): – Action: Increase 4–6% – Confidence: High; tenants have fewer options
Moderate market (balanced supply/demand): – Action: Increase 3–4% Confidence: Moderate; be ready to negotiate
Soft market (high vacancy, low demand): – Action: Increase 0–2% or skip Confidence: Low; tenant has many options
Question 4: What are your expenses doing?
Property taxes, insurance, maintenance up 5%+: – Action: Increase rent 4–6% to maintain margin – Justification: Pass-through of real cost increases Expenses flat or minimal increase: – Action: Increase rent 2–3% (inflation match) Justification: Maintain purchasing power
Question 5: How long has it been since the last increase?
1 year: – Action: Standard increase (3–5%) 2+ years: – Action: Larger increase (5–8%) to catch up, but explain the gap Justification: “We haven’t raised rent in two years; this brings us to market rate”
Never (same rent for 3+ years): – Action: Stage increases over 2–3 years – Year 1: 68% – Year 2: 4–5% – Year 3: 3–4% – Justification: “We’re bringing rent to market rate gradually”
Real-World Examples: What Works (and What Doesn’t)
Here are five scenarios from our 250-property portfolio showing how rent increases play out.
Example 1: The High-Value Tenant (Small Increase, High Retention)
Property: 3-bed/2-bath in Okemos, $1,600/month Tenant profile: – 6 years tenure – Zero late payments – Excellent property condition Minimal maintenance requests – Family with kids in Okemos schools
Market rate: $1,700/month Decision: Increase to $1,650/month (+$50, 3.1%)
Reasoning: – Tenant is extremely valuable – Turnover would cost $1,500+ – Family is rooted (kids in school) – $50 increase = $600/year gain – Losing tenant risks 2–4 weeks vacancy + turnover cost
Result: – Tenant renewed immediately – No negotiation – Still with us 2 years later Lesson: Don’t chase the last $50/month when you have a great tenant. Retention beats revenue maximization.
Example 2: The Below-Market Property (Staged Increase, Successful Catch-Up)
Property: 2-bed/1-bath in Lansing, $900/month Tenant profile: – 4 years tenure – Reliable payer – Average property condition Market rate: $1,100/month Problem: Rent hasn’t increased in 4 years; now $200/month below market Decision: Stage increases over 2 years – Year 1: Increase to $1,000/month (+$100, 11%) – Year 2: Increase to $1,100/month (+$100, 10%) Communication: “We’ve kept your rent at $900 for four years while market rates have increased significantly. To bring rent to the current market rate, we’re implementing a gradual increase: $1,000 this year, $1,100 next year. This is still below what new tenants are paying for similar properties.”
Result: – Tenant renewed both years – Minimal pushback (acknowledged rent was low) Now at market rate Lesson: If you’re significantly below market, stage increases and communicate transparently. Tenants understand fairness.
Example 3: The Problem Tenant (Aggressive Increase, Encouraged Exit)
Property: 3-bed/1.5-bath in Holt, $1,200/month Tenant profile: – 2 years tenure – 4 late payments in past year – Excessive maintenance requests (many avoidable) – Property condition declining Market rate: $1,300/month Decision: Increase to $1,400/month (+$200, 16.7%) Reasoning: – Tenant is high-maintenance and unreliable – If they stay, we’re compensated for hassle – If they leave, we’re better off Result: – Tenant gave notice – Property re-rented at $1,350/month to better tenant New tenant: zero late payments, minimal maintenance, excellent condition Lesson: Use aggressive increases to filter out problem tenants. Sometimes turnover is the goal.
Example 4: The Soft Market Reality (No Increase, Retention Priority)
Property: 4-bed/2-bath student housing near MSU, $1,800/month Tenant profile: – 1 year tenure (students) – Reliable payment (parents paying) Average property condition Market rate: $1,750/month (down from $1,850 last year) Problem: Student housing market is soft; new supply coming online; vacancy up to 68% Decision: No increase; keep rent at $1,800/month Reasoning: – Market rate is actually declining – Vacancy risk is high (18–28 days average) – Turnover cost = $1,500 – Keeping reliable tenants beats chasing higher rent in soft market Result: – Tenants renewed – Zero vacancy – Avoided turnover cost and risk Lesson: In soft markets, retention beats revenue maximization. Know when to hold steady.
Example 5: The Inflation-Match Increase (Standard Approach, Smooth Renewal)
Property: 3-bed/2-bath in DeWitt, $1,400/month Tenant profile: – 3 years tenure – Reliable payer – Good property condition – Family with stable income Market rate: $1,450/month Decision: Increase to $1,450/month (+$50, 3.6%) Communication: “Your lease is up for renewal. Due to increases in property taxes, insurance, and maintenance costs, we’re adjusting rent to $1,450/month—a 3.6% increase that matches inflation and keeps us at market rate. We value you as tenants and hope you’ll renew.”
Result: – Tenant renewed within 3 days – No negotiation – Appreciated transparency Lesson: Standard 3–5% increases with clear communication work smoothly. Tenants expect this.
How to Communicate Rent Increases (Without Losing Tenants)
How you communicate the increase matters as much as the amount.
Rule 1: Give Plenty of Notice
Legal minimum (Michigan): 30 days for month-to-month; per lease terms for fixedterm leases
Best practice: 60–90 days Why: Tenants need time to budget, decide, and plan. Springing a rent increase with 30 days’ notice feels aggressive.
Our approach: Notify tenants 60 days before lease end. Gives them time to process and decide without feeling rushed.
Rule 2: Be Transparent and Specific
Bad communication: “Your rent is increasing to $1,300/month effective June 1.” Good communication: “Your lease is up for renewal on June 1. Due to a 4% increase in property taxes and a 6% increase in insurance costs, we’re adjusting rent to $1,300/ month—a $50/month (4%) increase. This keeps us at current market rate for similar properties in the area. We value you as tenants and hope you’ll renew.”
Why it works: – Explains the “why” (taxes, insurance, market rate) – Quantifies the increase (dollar amount and percentage) – Acknowledges tenant value – Invites renewal (not a demand)
Rule 3: Offer a Lease Length Option
Strategy: Give tenants a choice to increase buy-in.
Example: “We’re offering two renewal options: 1. 12-month lease: $1,300/month 2. 24month lease: $1,275/month (locked rate for 2 years)” Why it works: – Tenants feel they have control – 24-month option locks in a good tenant and avoids another increase next year – Discount incentivizes commitment Our data: 40% of tenants choose the 24-month option when offered.
Rule 4: Be Open to Negotiation (Selectively)
When to negotiate: – High-value tenant (long-term, reliable, low-maintenance) – Soft market (high vacancy, low demand) – Tenant proactively reaches out with reasonable counter-offer When NOT to negotiate: – Average or problem tenant – Hot market (low vacancy, high demand) – Tenant is already below market rate Example negotiation: – You propose: $1,350/month – Tenant counters: $1,300/ month – You respond: “We can do $1,325/month if you sign a 24-month lease.” Result: Tenant feels heard, you lock in a long-term tenant, and you’re still above your minimum.
Rule 5: Use Written Communication
Always send rent increase notices in writing (email, letter, or portal message). Why: – Creates a paper trail – Avoids miscommunication – Feels professional and official – Gives tenant time to process without feeling pressured Our approach: Send via AppFolio portal + follow-up email. Tenants can respond in writing, and we have documentation. The Simply Live Approach to Rent Increases
Here’s our exact process for managing rent increases across 158 properties.
Step 1: Annual Market Analysis (60 Days Before Lease End)
Action: Research current market rate for each property Data sources: – Zillow, Apartments.com (active listings) – AppFolio analytics (our portfolio averages) – Local property manager network (market intelligence) Output: Market rate range for each property
Step 2: Tenant Quality Assessment
Action: Review tenant performance over past year Criteria: – Payment history (on-time vs. late) – Property condition (inspection reports) Maintenance requests (frequency and type) – Lease compliance (violations, complaints) – Tenure (years with us) Output: Tenant quality score (High, Average, Problem)
Step 3: Calculate Proposed Increase
Formula: – High-value tenant: 2–3% or match inflation – Average tenant: 3–5% or match market growth – Problem tenant: 6–8% or non-renewal Adjustment factors: – Below market rate: Add 1–3% – Hot market: Add 1–2% – Soft market: Subtract 1–2% – Long tenure (5+ years): Subtract 1% Output: Proposed rent increase amount and percentage
Step 4: Communicate Increase (60 Days Out)
Method: AppFolio portal message + email Template: “Hi [Tenant Name], Your lease is up for renewal on [Date]. We’ve valued having you as tenants and hope you’ll renew.
Due to [specific reason: property tax increase, insurance increase, market rate adjustment], we’re adjusting rent to $[New Amount]/month—a $[Increase]/month ([Percentage]%) increase.
We’re offering two renewal options: 1. 12-month lease: $[New Amount]/month 2. 24month lease: $[Discounted Amount]/month (locked rate for 2 years) Please let us know your decision by [Date]. If you have questions or would like to discuss, feel free to reach out.
Thank you, Simply Live Property Management”
Step 5: Follow Up and Finalize (30 Days Out)
Action: If no response after 2 weeks, follow up via phone or text Goal: Get a decision (renew or move) by 30 days before lease end If tenant negotiates: Evaluate based on tenant quality and market conditions; respond within 24 hours If tenant declines: Begin marketing property immediately
Results (2025 Year-to-Date)
Renewal rate: 82% (industry average: 60–70%) Average rent increase: 3.2% Tenant pushback rate: 8% (most resolved via negotiation) Turnover cost per property: $1,200 (below industry average of $1,500–$2,000) Vacancy rate: <2% (industry average: 5–7%) Key insight: Small, consistent increases + transparent communication = high retention and minimal pushback.
Common Rent Increase Mistakes (and How to Avoid Them)
Mistake 1: No Increase for Years, Then a Big Jump
Problem: Rent stays flat for 3–4 years, then landlord raises it 15–20% to catch up. Tenant is shocked and leaves.
Solution: Small, annual increases (3–5%) are easier to absorb than one large increase.
Mistake 2: Ignoring Tenant Quality
Problem: Landlord raises rent 8% on a high-value, long-term tenant. Tenant leaves. Turnover costs $1,500 + 3 weeks vacancy. New tenant is average quality. Solution: Adjust increase based on tenant value. Keep great tenants with minimal increases.
Mistake 3: Raising Rent in a Soft Market
Problem: Market vacancy is 8%, days on market is 30+, but landlord raises rent 5% anyway. Tenant leaves. Property sits vacant for 6 weeks.
Solution: Know your market. In soft markets, retention beats revenue maximization.
Mistake 4: Poor Communication
Problem: Landlord sends a one-line email: “Rent is now $1,400. Sign the lease or move out.”
Solution: Transparent, respectful communication with clear reasoning and options.
Mistake 5: Raising Rent Every Year on Long-Term Tenants
Problem: Landlord raises rent 4% every year on a 10-year tenant. Tenant finally leaves because they feel taken for granted. Solution: Skip increases every 2–3 years for long-term, high-value tenants. Goodwill is worth more than $50/month.
Key Takeaways: How Much Is Too Much?
- Context matters more than the number A 5% increase in a hot market with a problem tenant is reasonable. A 5% increase in a soft market with a high-value tenant is risky.
- Small, consistent increases beat large, sporadic ones Annual 3–4% increases are easier for tenants to absorb than no increase for 3 years followed by 15%.
- Tenant quality should drive your strategy High-value tenants deserve minimal increases. Problem tenants should face aggressive increases or non-renewal.
- Turnover costs more than you think $1,500 average turnover cost + 2–4 weeks vacancy = $2,000–$2,500 total cost. Don’t lose a good tenant over $50/month.
- Transparency builds trust Explain the “why” behind increases. Tenants accept increases when they understand the reasoning.
- Market conditions determine pricing power Hot markets allow 4–6% increases. Soft markets require 0–2% or no increase.
- Tenure matters Long-term tenants (5+ years) are gold. Keep them with minimal increases or skip every other year.
- Stage large increases over multiple years If you’re 15% below market, don’t jump there in one year. Stage it: 6% Year 1, 5% Year 2, 4% Year 3.
- Offer lease length options 12-month vs. 24-month with a discount gives tenants control and locks in good tenants.
- Know when to hold steady In soft markets or with high-value tenants, skipping an increase is often the smartest financial move.
The Bottom Line
How much is too much? It depends on your market, your tenant, your property condition, and how long it’s been since the last increase.
General guidelines: – 0–3%: Safe for almost all situations – 3–5%: Reasonable in most markets with average tenants – 5–8%: Aggressive; expect some turnover – 8%+: Very aggressive; use strategically (problem tenants, far below market)
The goal isn’t to maximize rent—it’s to maximize long-term profitability.
Sometimes that means raising rent 5%. Sometimes it means raising it 2%. Sometimes it means skipping the increase entirely.
The best landlords know the difference.
Rent increases are one of the most important—and most misunderstood—aspects of property management. If you’re unsure what increase is right for your property, we offer free 20-minute consultations that include market analysis, tenant quality assessment, and increase recommendations. Our cost is your cost—transparent guidance backed by 19 years of data and 158 properties managed.
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