Landlording and Property Management are just like any business. Real estate costs rise over time, from property tax bills, to insurance premiums, to mortgage rate increases – so landlords sometimes need to raise tenants' rental payments or leasing fees to maintain profitability. Raising a tenants' rent can prove a challenging situation for many landlords, so here are a few suggestions to help make this navigate this necessary task successfully.
5 Landlord Tips For How To Raise Rents
Tip 1: Research Market Rents
It's far easier to raise the rent if you're raising it to a reasonable level and comparable to other local rents. Find out what other local landlords are charging for similar properties, and if your tenant balks at your raise in rent, show them the data on what they can expect to pay for similar rental properties.
Tip 2: Planning Ahead
Many states require advance notice of at least 30-90 days when raising rents or changing lease terms. This is something you will need to research for your state. Having the conversation sooner rather than later gives you an opportunity to find a new tenant, creating a smooth transition if the rental increase is not accepted.
Tip 3: Face to Face Notification
While it may seem easier to have this conversation by phone or by mail, the fact is human beings are less likely to say “no” in person, making a face-to-face conversation a more effective approach.
Tip 4: Consider The Best Time To Raise Rents
Spring into the Summer season, is the best time to raise rents. Statistically, many more Americans move during the spring and summer months, which makes it far easier to fill vacant rental units during these warmer months.
By raising the rent as the warmer months approach, you can ensure an easier time leasing the property if your current tenant decides to move out instead of paying the higher rent or lease term.
Tip 5: Optional Longer Rental Agreement
Doesn't this sound ideal… higher rental income and an extended term, securing a rented property for the next two years? 100% Possible!
When a tenant expresses their unhappiness regarding a rental increase – tell them you understand that they have their own bills and their own concerns, and that you're willing to extend their rental agreement from 12 months to 18 or 24 months.
This will offer written assurance that you will not raise their rent again for a year and a half or two.
Maintaining Positive Monthly Cash Flow
Implementing rental increases may not be an easy task, but it's often necessary if you intend on actually earning a positive cash flow on your investments. Always remember to be fair and honest. Remember that rent cannot be raised in the middle of the lease term, and remember that sometimes securing a longer-term tenant may be more valuable than an extra $25 a month.