Apartment Investing – When Should You Raise Rents?

“Some people find fault like there is a reward for it.” — Zig Ziglar

One of the most frequently asked questions I get from apartment investors is when they should raise the rent on their units. This is an issue that all apartment investors face at one time or another.

The mistake I see investors make on this subject is moving too slow on rent increases. Human nature moves many apartment owners to put this off because things are going along OK, their property is full, and they do not feel rushed to raise the rents on existing tenants. I have heard investors make comments, such as:

“Oh, I will raise rents in the spring.”

“After my daughter graduates, I plan to work on this.”

“Martha has been a good tenant for 3 years now, she pays on time, and after all, she is on a fixed income.”

Suffice to say, there are many thoughts that enter an apartment investor's mind when thinking about this subject. So, back to my original question, “When is the best time to raise rents?”

The answer…When your occupancy exceeds 95 – 97% it is time to raise your rents. OR when you have residents that have not had a rent raise in some time, and are wayyy below market..

Many of us are too slow because psychologically we want a full building. Rather than focusing on full occupancy, you should constantly be striving to maximize profits, and therefore the value of your property. I could go into even more detail but bear in mind that raising rents has a lot more benefits than just extra or additional cash flow.

You need to be in the business if steadily increasing your rental income and keep in mind that this is not a social exercise but a business. Many of us (including me) sometimes fall into the trap of not raising rents because the resident is nice, single, between jobs, etc.

Always keep in mind that you are in business of rental – not of providing affordable housing. It is one in the same, yes, but there is a difference…

Suggestion. Have a schedule where you review your rentals at least quarterly to see if you need to be raising rents. Of course, you should always be thinking of when you can raise the rents.