Most landlords should raise rent by roughly 5 to 10 percent every year rather than holding it flat and catching up all at once. Small, steady increases keep you at fair market value, protect you from tax issues on under-market rent, and avoid the tenant shock that comes with a sudden jump. In California, this also keeps you comfortably inside the AB 1482 cap (roughly 8.8 percent total in recent years).
That answer came out of a real portfolio review I did recently, and the story behind it is worth telling in full because it’s the kind of situation a lot of landlords are sitting in right now without realizing it.
I’ve been a mortgage advisor for over 25 years, and I still love this part of the job most: sitting down with a client, opening up their whole portfolio, and finding the one number that changes everything.
That’s exactly what happened during a recent Mortgage Check-Up with a longtime investor client. I’ll call her Maria. She owns four rental properties spread across three states, and by the end of our call, we’d uncovered a rent increase mistake that was quietly costing her thousands, a property manager problem serious enough to consider legal action, and a refinancing move that could save her portfolio real money for years.
Here’s the full story, and the advice I gave her (Amy DeBusk, Certified Mortgage Planner) that any landlord or investor can use.
The $400 Rent Jump That Never Should Have Happened
Maria’s Florida rental had been sitting on the same month-to-month lease since 2023. The tenant was reliable. She paid on time. She took care of the place. So the rent just… never got revisited. Between COVID-era pauses and everyday busyness, three years went by.
By the time we pulled the numbers together, that rent was sitting well below market. Her property manager’s solution? Raise it $400 in one shot to catch up.
Maria said no immediately. Her words stuck with me: that felt cruel, not a business decision.
She’s right. And here’s what most landlords don’t realize until they’re staring at this exact situation: letting rent sit flat for years doesn’t just cost you monthly income, it can create real tax exposure. The IRS expects rental income to reflect fair market value. Maria found that out the hard way once we looked at the full picture together.
So what’s the fix? I told her exactly what I tell every investor client:
“That’s where landlords really screw up. I see it time and time again. You have to raise it a little every year, not catch up all at once.”
The rule I give my clients: raise rent by roughly 5 to 10 percent every year, not zero percent for three years followed by a shock increase. If Maria’s property manager had simply nudged the rent up $50 a year, there would have been no $400 conversation, no tenant tension, and no tax surprise.
If you’re investing in California, this matters even more. AB 1482 caps most annual rent increases around 5 percent plus inflation (roughly 8.8 percent total recently) for covered properties. Small, steady increases keep you compliant automatically. Rules vary by state and property type, so always confirm your local caps before setting a number.
“I’m Going Month-to-Month!” (The Tenant Threat That Wasn’t)
Here’s where the story gets interesting. On a different property, when Maria mentioned an upcoming rent increase alongside some floor repairs, the tenant pushed back hard. Then she played what she thought was her trump card: “Fine, I’ll just go month-to-month.”
Maria saw right through it. That tenant had zero intention of actually moving. It was posturing, plain and simple.
This is a skill I try to teach every investor I work with: not every tenant complaint is a crisis, and not every pushback is a real threat. Compare that moment to a different tenant in Maria’s portfolio who reported a broken part in her freezer. That wasn’t posturing. That was a real maintenance issue that needed a repair visit, and it got handled right away.
The difference between those two moments is everything. Landlords who can’t tell them apart either get steamrolled by empty threats or ignore complaints that actually need attention. Both mistakes cost money.
The Property Manager Problem That Could Cost $7,000
This is the part of Maria’s story that made me genuinely frustrated on her behalf.
During a routine inspection of her Tennessee property, it came out that the AC unit was missing entirely, and painting work that should have been completed months earlier had never been finished. This had apparently gone unaddressed for a long stretch, and the property sat unrented as a result.
Maria is now weighing whether to report the management company to the Department of Real Estate. We also talked through whether she has grounds to pursue the estimated $7,000 in rental income lost during those vacant months, income that should have been there if the property had been managed properly.
Here’s what I told her to do, and it’s advice I’d give any investor in this spot:
- Price out the fix yourself. Maria is getting her own AC quotes so she has a real number to hold the responsible party to, instead of just accepting whatever number she’s given.
- Get it in writing. Every warning, every deadline, every promise from a property manager needs a paper trail.
- Know your property’s real value. Maria’s property had actually held its value around $108,000 to $109,000 despite all of this, which matters enormously if this situation ever needs to go further.
- Don’t let it drag. A property sitting empty because of mismanagement isn’t a one-time loss. It compounds every single month.
The Refinance That Could Save $360 a Month, Starting Now
While we were deep into the rental conversation, I pulled up Maria’s primary residence loan. She was sitting at 8 percent on a VA loan.
I found her a path down to 6.375 percent. That’s roughly $360 a month back in her pocket, starting the month the new loan funds. No waiting for the market to cooperate. No hoping rates drop. Just a straightforward refinance that immediately frees up cash flow she can put toward the next property, a renovation, or simply breathing room.
Turning Rental Income Into Financing Power: The DSCR Conversation
Here’s where Maria’s story becomes a masterclass in something a lot of investors don’t fully understand: you can qualify for a mortgage using your property’s rent, not your personal income.
It’s called a DSCR loan (debt service coverage ratio loan), and it’s one of the most powerful tools available to real estate investors in 2026. For Maria’s Barstow property, we looked at the $2,085 monthly rent against the mortgage payment using the roughly 75 percent rent-to-mortgage ratio that’s commonly used to qualify these loans, backed by a rental survey to confirm the number holds up.
No tax returns. No W-2s. No personal debt-to-income math. Just: does the property pay for itself? For Maria, and for a lot of the investors I work with, that’s the difference between a portfolio that stalls out and one that keeps growing. If you’re comparing structures, see DSCR loans vs. conventional loans for real estate investors.
Should You Refinance Now or Wait? My Honest Answer
Maria asked me the question every investor is asking right now: with rates elevated (driven in part by ongoing tension in the Middle East affecting global markets), should she refinance now or hold off?
My advice: keep the cost of any refinance low right now. That way, if rates drop further down the road, you’re not locked into a big expense you just paid for. You’ll have room to revisit the loan later, potentially into a VA product, without feeling like the earlier move was wasted money.
It’s a strategy that works whether you’re refinancing one property or, like Maria, thinking about four at once.
The Real Lesson: See Your Whole Portfolio at Once
Most investors evaluate their properties one at a time. Rent here. Repair there. Refinance somewhere else, eventually, maybe.
When I sat down with Maria and reviewed all four properties together, patterns showed up that never would have been visible looking at any single property alone. The equity across her portfolio was substantial. The under-market rent on one property was quietly weakening her position on financing for another. The refinance on her primary residence could fund the fixes needed elsewhere.
That’s the whole philosophy behind how I work with investor clients: your properties aren’t separate problems. They’re one portfolio, and the right moves on one property change what’s possible for the rest.
Free Investor Planner and Guide: Build the Strategy Before the Next Deal
Good portfolio decisions begin before the next offer, renovation, or refinance. Amy created free resources to help investors organize their goals, evaluate opportunities, and prepare better questions for a portfolio strategy conversation.
Download the free planner. Use the Investor Vision & Strategy Planner to clarify your investment goals, preferred strategy, risk tolerance, cash-flow targets, and roadmap for building long-term wealth.
Read the free investor guide. The Ultimate Guide to Real Estate Investing in 2026 covers buy-and-hold investing, financing choices, DSCR loans, BRRRR planning, risk, and portfolio growth.
Learn how rental income supports qualification. The guide to DSCR loans using rental income explains how property cash flow can be used instead of traditional personal-income documentation.
Organize a property scenario before the call. The free Investor Deal Maker GPT can help you gather the numbers and questions that deserve a closer review.
If Maria’s story sounds familiar – whether you have rent that has fallen behind the market, a property manager you no longer trust, or equity that may be able to work harder – a full portfolio conversation can help you see the available paths more clearly.
Ready to review your portfolio with Amy DeBusk? Schedule a free strategy call to discuss your properties, financing options, and next steps.
Top Takeaways: What Every Landlord Should Walk Away Knowing
- Raise rent by 5 to 10 percent every year. Small and steady beats a painful catch-up jump, for you and your tenant. Check your state’s caps (California investors: AB 1482 limits most increases to roughly 8.8 percent).
- Under-market rent isn’t just lost income. It can trigger real tax issues. The IRS expects rent to reflect fair market value.
- Learn to tell posturing from a real problem. A tenant threatening to “just go month-to-month” is often bluffing. A broken appliance is not.
- A negligent property manager can cost you thousands. Document everything, price out repairs yourself, and know your legal options.
- DSCR loans let your rental income qualify you for financing, even when your personal income and tax returns don’t tell the full story.
- When rates are elevated, keep refinance costs low so you can revisit the loan again later without regret.
- Review your whole portfolio together, not property by property. The full picture changes what’s possible for every piece of it.
❓FAQs about Landlord and Real Estate Investor
Most landlords should plan on a rent increase of roughly 5 to 10 percent every year rather than leaving rent flat for multiple years. Small, predictable increases keep your property at fair market value and avoid the tenant shock (and potential vacancy) that comes with a large catch-up increase later. The right number for you depends on your local market and any state or city rent caps that apply to your property.
Yes. Under California’s Tenant Protection Act (AB 1482), most covered rental properties are limited to an annual increase of 5 percent plus local CPI, or 10 percent, whichever is lower. In practice, this typically caps out around 8.8 percent depending on the year and region. Some properties are exempt, including certain single-family homes and newer construction, so it’s worth confirming your specific property’s status before setting a new rent amount.
Beyond the obvious lost income, letting rent sit well below market for an extended period can create real tax complications, since the IRS expects rental income to reflect fair market value. It also puts you in the position of needing a large, sudden increase to catch up, which is far more likely to upset a good tenant than a series of small annual adjustments would have been.
Keep the increase small and predictable rather than sudden and large, and communicate clearly rather than just sending a notice. Tenants who see modest, consistent increases tend to view them as normal. Tenants who go years without an increase and then get hit with a large one often feel blindsided, which is when good tenants start looking elsewhere.
Watch for follow-through versus posturing. A tenant who threatens to move to month-to-month or leave over a routine increase, but has no real plan to go anywhere, is usually testing the waters rather than making a genuine decision. A tenant reporting a specific, concrete issue, like a broken appliance or a maintenance need, is describing a real problem that needs action. Reading the difference correctly keeps you from either over-conceding or ignoring something that actually matters.
A DSCR loan (debt service coverage ratio loan) qualifies a borrower based on a rental property’s income rather than personal income, tax returns, or W-2s. Lenders typically look at whether the property’s rent covers the mortgage payment at a set ratio, often around 75 percent or higher. This makes DSCR loans especially useful for investors with multiple properties, self-employed income, or a portfolio that’s outgrown what conventional financing can support.
It depends on your specific numbers, but a general strategy worth considering is keeping the cost of any refinance low while rates are elevated. That way, if rates drop further later, you’re not locked into a large expense you just paid for, and you have room to refinance again without feeling like the earlier move was wasted. A mortgage advisor can run the actual numbers on your property to see whether refinancing now makes sense or whether waiting is the better move.
Start documenting everything in writing, including repair requests, timelines, and any promises made. Get independent quotes for needed repairs so you have a real number to compare against what you’re being charged or told. Know your property’s value and rental income potential so you can recognize when mismanagement is costing you money. If the losses are significant, you may have grounds to pursue lost income or file a complaint with your state’s real estate regulatory body.
If Maria’s story sounds familiar, if you’ve got a rental that hasn’t had a rent increase in years, a property manager you’re not sure you trust, or equity sitting in your properties that you haven’t put to work yet, this is exactly the conversation I love having.
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