There comes a time in every landlord or property manager’s career when raising rental rates becomes necessary. Whether it’s due to the going market, higher taxes or insurance costs, rising expenses for property upkeep or something else, increasing the rent can be an uncomfortable task. Especially if you’re concerned that doing so may drive good tenants away. With the right approach, however, this process can be a smooth, positive and uneventful one. Here are a few expert tips to keep in mind.
Do your homework.
You’re not obligated to explain your financial decisions to your residents, but that doesn’t mean you should just raise the rent without being able to justify it. Asking for too much will almost certainly send your good tenants packing, which is the last thing you want. Be sure to do some research and make sure the new amount you’re seeking is fair and competitive for your area. That way, if your tenants start looking elsewhere, they’ll discover that the grass isn’t greener and feel more comfortable paying the increase.
Understand the law.
In addition to keeping new rates competitive, property managers should be mindful of the laws and regulations governing rental increases. Just because you own or manage the property, doesn’t necessarily give you the right to raise the rent by as much as you’d like. For instance, your property may be rent controlled or there may be a statute limiting the amount you’re allowed to increase the rent by. Likewise, if you have a fixed lease, you can’t raise the rent until the term is up. Additionally, there may be rules regarding the amount of notice you are required by law to provide. Be aware.
Increase incrementally at each lease renewal.
Another option is to slowly but steadily raise the rent by automatically increasing the amount due each time you renew your lease. Raising rates by $25-$50 at a time can make it less burdensome for tenants than, say, springing a full $200 monthly increase on them at once. By doing it incrementally, you’ll also have the option to waive one of the increases as an incentive to get a particularly good tenant to renew. After all, you’ll always have the ability to make up the difference once he or she finally does move out.
Give plenty of notice.
Not only does sending proper notice give tenants ample opportunity to prepare for the rental increase, but it also helps property managers to know what the tenant’s intentions are. That way, should they choose not to renew their lease, there will be plenty of time to prepare ahead to market and show the property and avoid a long vacancy period. Rent increase notification should always be done in writing and must include the new amount as well as the date the increase will become effective. Rule of thumb (and in most cases, law) is typically 30 days, but 60 or 90 days is advisable.
Raising the rent is a necessary evil for landlords and property managers. With the strategy above, however, it doesn’t have to be an unpleasant experience for either party.
