Rent increase versus tenant retention for a townhouse in Lisbon?

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Landlord
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Market asking rent for a comparable Lisbon townhouse appears to be around €5,150, while my tenant currently pays about €4,663. They pay on time, care for the home and report maintenance problems before they become expensive.

I am considering a modest increase, but turnover could mean vacancy, refurbishment and deposit handling as well as the risk of a less reliable replacement. How would you frame a fair rent review while complying with the applicable Portuguese notice rules and preserving the relationship?
 
I would value the tenant rather than chase the full asking figure. The gap is €487 per month, but one vacant month at the current rent would consume almost ten months of that difference, even before refurbishment or reletting costs. First confirm what increase and notice your particular contract permits, then propose something below the apparent market level with clear written reasoning.
 
How comparable is the €5,150 figure? Is it an asking price for the same area, size, condition, furnishing and contract length, or evidence of a completed letting? Asking rents can sit above what tenants ultimately agree to pay. I would also look at how long those townhouses remain advertised before treating that number as the market.
 
I would not assume that keeping the rent unchanged is automatically the relationship-friendly option. If the gap keeps widening, a later adjustment may feel much harsher. A smaller review now could be easier for both sides, provided it is permitted under the lease and local rules. Give the tenant proper time and invite a conversation rather than presenting €5,150 as an ultimatum.
 
There is also a middle course: decide the minimum increase that meaningfully helps with ownership and maintenance costs, rather than working backward from the highest listing. Set out the proposed amount, effective date and why you still consider it below comparable asking rent. Before sending anything, have the lease terms, timing and required form of notice checked for Portugal; those details can depend on the agreement.
 
Make a simple retention-versus-turnover worksheet before choosing the figure. Include likely vacancy time, preparation work, advertising or letting expenses, and the administrative work around inspection and deposit handling. Then compare that total with the extra annual rent from each proposed increase.

Given the payment and maintenance history, I would also acknowledge those positives explicitly. A calm message offering a modest adjustment and enough time to respond is more likely to preserve goodwill than a bare notice based only on advertised rents.
 
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