The Delicate Art of Rent Increases
Everyone knows that rent increases are a fact of life, but they also need to be right!
Many owners want to raise the rent whenever. You shouldn’t increase the rent because you’ve had an expensive year, or a major roofing job. Instead, your rental rates should be dictated by one very simple factor: The Rental Market.
Simply put, your rental price will be determined by how much tenants are willing to pay. Use anything other than this criteria, you run the risk of losing them and experiencing higher vacancy rates.
Let’s look at how you can accurately assess the market and how to go about tactfully breaking the news to your tenants.
Ensure Compliance With the Law
First things first: Make sure your proposed rent increase is in compliance with state and regional laws, and of course, in accordance with the terms of your lease.
Sufficient notice, 30 days’ – is generally required for month-to-month leases. For fixed-lease properties, you’ll want to let tenants know before the lease is up.
Give Extra Notice
Sure, you’re required to give enough notice to be in compliance with the law — but why stop there? We give tenants extra time to prepare for the increase, and allow them a chance to shop around. If the increase is in line with market rates, they’ll see that there’s no better deal to be had. We time notices so that the rent increase will take place immediately after the lease renewal date.
When we inform tenants about rent increases in writing. Without a written agreement, a rent increase will be difficult to enforce.
We try for small increases yearly, instead of having to raise the rent substantially. This helps tenants get used to rent going up, and you’ll find them less likely to complain over a $20 per month increase as opposed to a sudden $200 jump.
Calculate the Rent Increase
We do our research to be competitive with local rental market rates. We do this by looking at other similar rentals or by multiplying the consumer price index by your current rental rate. For example, the ‘Bureau of Labor Statistics’ most recent release indicates that the index for shelter increased 3.2 percent in 2015. Rent is only adjusted to the local rental market.
Determine Why You’re Raising the Rent
Your tenants will want to know, and you’ll need an answer. Be truthful and make a list of reasons why the rent needs to go up, such as rising insurance costs, higher taxes, and the cost of inflation. Main reasons for a rent increase usually include the rising cost of maintenance and repairs
Keep Your Tenants Happy
Also having an excellent tenant who looks after the property and pays rent on time, is an excellent reason not to raise the rent as an incentive to stay. If it needs to be raised, one way to do this is to show them what the rent increase was going to be, then crossed out and with a smaller percentage, for being a great tenant. Communication is key: we are in touch and are willing to talk to them about the increase.
Another option would be to consider offering your tenants a compromise. Propose a rent increase, and be prepared to lower the percentage if they are willing to sign a longer lease.
Rent increases are stressful, but we ensure that the raise in rent is in line with market values. We communicate all upcoming changes to your tenants making the process as simple and straightforward as it can be.