Raising the rent calls for a blend of remarkable public relations with tenants, good business skills, a lot of research, and knowledge regarding legal requirements. Thus, it usually gives an inexperienced landlord cold feet, especially if he doesn't know how to inform his tenants regarding this increase. It doesn't matter if you're a new landlord, or property owner these tips would help you increase your rent the right way.
Incorporate these simple techniques in raising your rental payments:
1. If Possible, Try to Include a Small Rent Increase at Each Lease Renewal Period
For a rental property, it's usual that there would be a slight rent increase of $20-$50 every renewal-- tenants expect this, and would agree without causing any issues. However, if you have decided to increase the rent by $200 or more, and there hasn't been an increase for the last 5 years, then expect your tenants to give you negative feedback. As a rule of thumb, you should raise the rent about 3-5% every year.
There will be instances where you would want your excellent tenant to renew his contract with you. In situations like this, waiving the rent increase, as long as they sign for another year, is recommended. After all, once this tenant has fully decided to move out, you can easily increase the rent for the new tenant without any issues at all.
2. Know Your Tenants
As a landlord, it is your responsibility to maintain a great landlord-tenant relationship, and getting to know your tenants is an essential in achieving this. This comes in handy, because when it's time to increase the rent, you can easily approach them without feeling anxious. Also, by having a good relationship with your tenant, they can easily accept why you have to increase their rent-- this would be a little complicated if they only see you as a name they write on a check.
3. Familiarize Yourself with Legal Limits
You have to consider that there might be a legal limit on how much and how often you can increase the rent. It's very important that you know these guidelines to prevent any problems.
4. Always Be Prepared
If the reason why you're going to increase the rent is because of the economy-- how inflation rates are affecting your property, then you have to be fully prepared and be able to explain why you really have to increase it. Although some people wouldn't require you to elaborate further, there will be some who would want to double check your work or be able to clearly understand what you are trying to convey.
5. Be a Caring Landlord
If you want your tenant to whole-heartedly agree with the rent increase, you have to capture their hearts. So, instead of merely focusing on the numbers, try your best to discuss how the increase would affect you. For instance, if there has been a sudden hike in the utility costs, be honest with your tenant and try your best to explain how this affected your monthly revenue. Don't worry, people understand matters like this, and they will be more likely to agree if they know the personal reason behind the rent increase.
6. Make Reasonable Promises
Another effective strategy to make your tenant agree to the rent increase you're planning to initiate is to promise them that there won't be any increase for the next few months or year. Basically, the point here is you want to give them the stability and consistency that they need.
Other Tips for a Smooth Rent Raise
Here are some additional reminders worth considering if you have decided to increase the rent.
- Give Your Tenant As Much Notice As Possible
The bare minimum would be 60 days. You have to give your tenant ample time to decide if they would fully agree with the increase, or it's time for you to look for a new tenant.
- As much as possible, try to only increase the as units turnover. By doing so, you wouldn't make your existing tenants upset and avoid having negative feedback on your business.
- Send notices of rent increase in writing and make sure that it's also indicated in the lease.
Any landlord knows the challenge and anxiety that goes with raising the rent. You don't want to upset your tenants, but you really have to increase the rent at some point. These tips would make the process a little easier.
Great article. A modest increase in a hot market is almost never an issue but it can be tougher in a slow market. I try to couple the modest increase with upgrades. A $50 increase is much more acceptable when it comes with a new appliance for example. It sets the rent higher for the next round while also adding value to the unit.
Domenick | AccidentalRental.com