Introducing Rent Increases, Successfully

RENT INCREASES. I cringed a little just typing it. As uncomfortable as they can be to address, they are a necessary evil! After investing time and money into your rental property, it makes sense that you want to ensure that the property is well-maintained, adequately insured, and that property taxes are paid on time. These costs can quickly add up, which may make it necessary to increase the rent of your rental property.

In some situations, tenants may be on a lease, which essentially locks in a price for the terms of the lease. Other landlords and property managers may opt to rent to tenants on a month to month basis.  Obviously this provides a bit more leeway in regard to breaching the topic of a rent increase. Regardless of which type of lease agreement, it may be time to introduce an increase to your tenants in order to cover the costs associated with maintaining and updating your investment.  Here’s how to introduce rent increases, successfully…

Get the rent you need with minimal disturbance to your tenant.

When to Introduce a Rent Increase

If your tenants have a 12-month lease, you may want to inquire as to your tenant’s intentions regarding moving or signing another lease. If your tenant is happy with where they are and would like to renew their lease, it may be a good time to assess the costs associated with maintaining your investment property.

Maintenance costs can quickly add up and often increase over the years. !However, it should be an increase that is representative of the condition in which the property is maintained by a landlord or a member of a property management team. It should also be reflective of any additional costs that have experienced an increase, such as taxes and insurance premiums. If your tenant is on a 12-month lease (some suggest that at the end of each lease term) increase the rent a small amount. It is recommended that the increase be no more than 10%, or you may risk losing the tenant.

How to Introduce a Rent Increase

After you have decided that it is time to increase the rent of your property, you will need to notify your tenant(s). If it is nearing the end of your tenant’s lease, it is suggested that you give them 60 days’ notice of the increase in rent if they decide to remain on the property. This notice should be done in a way where you are able to ensure that your tenant(s) have received the notice, such as in person or certified mail.

Things to Consider

Before you decide to increase the rent your tenants pay, it is best to make sure that you have reliably held up your end of the lease contract so that your tenant(s) does not view the increase as a form of retaliation for requesting repairs and maintenance to the property, keeping it up to code. Additionally, when considering how much you may need to increase the rent, be aware of the local rental market to ensure that your property is on par with what the rental rates are in the area.

Conclusion

When it comes to increasing the rent on your rental property, it can be difficult, as you may not want to rock the boat and risk losing your current tenants. However, if the fees associated with managing and owning the property become excessive in comparison to the rent you are collecting, it may be time to broach the subject of an increase in rent. Going about it the right way can help to increase the likelihood that your current tenant(s) will remain, providing you with a reliable source of income for the duration of the lease contract.

References

The Educated Landlord. (2014, March 17). Raising Your Rents Without Disappointing Your Tenants. Retrieved from https://theeducatedlandlord.com/raising-the-rents-without-raising-the-roof/

Landlordology. (2017, April 27). How to Raise the Rent in 4 Easy Steps. Retrieved from https://www.landlordology.com/how-to-raise-the-rent-in-4-easy-steps-free-template/

Rocket Lawyer. (n.d.). Rent Increase Letter basics. Retrieved from https://www.rocketlawyer.com/document/rent-increase-letter.rl#/

Spark Rental. (2018, January 10). Hike ‘Em Up: 6 Tricks to Raise Rents Without Losing Renters. Retrieved from https://sparkrental.com/6-tricks-to-raise-rents-without-losing-tenants/