Raising rent can be a risky prospect for both a landlord and tenant. Raise the rent too much and landlords can send tenants scurrying to find a new place to live. Choosing not to raise rent or raising it by too low of an amount can lead landlords to miss out on revenue they may need to cover increasing costs and save for capital improvements. Below are some tips that can help in decreasing the shock to tenant’s wallets which will hopefully lead them to stay happy and with you. In addition, make sure to always follow you're local and state laws related to raising rent.
When thinking about raising rent, it is first important to calculate any new or higher expenses that are eating in your profit margin. That can include insurance premiums, higher utility costs or maintenance. Once you calculate your increased expenses, you have a better sense of what you need to raise rent just to be as profitable as in the previous year.
Hopefully you have not seen such a high rise in expenses which will give you more room in deciding how much to raise rent because you’re more likely to be able to hold on to tenants if you raise rents between 2-4% every year. Raising rent every year by a similar amount gets your tenants used to rent rising, and they can predict and plan for it. If you do not raise rent at all for several years there will likely come a time where you will need to raise it and even a small amount could spook tenants. Also, if you raise one tenant’s rent to high you might spook not just one tenant but every other tenant you have in the same property whose lease may be ending soon.
If you have a tenant that you would not want to lose confront you about the rise in rent and wants to negotiate, let them know the reason why your raising rent and also think about offering them a longer-term lease that locks in a smaller rent increase to lock the tenant into your property for a longer period.
If you are raising rent make sure to give your tenants plenty of notice of the rise in rent before their lease ends. A reasonable amount of notice could be anywhere between 90-60 days. Giving tenants notice not only makes them feel like you’re not taking advantage of them but also gives them enough time to let you know if they are not staying so you can market the apartment appropriately
Raising rent can be tricky but it does not have to be. Saving money by cutting unnecessary expenses means you do not need to raise rent to an amount that will scare away tenants and leave you with vacant units that cost you money. Using an affordable rental property management system can save you time and money by helping you cut unnecessary costs.
This post is provided by RISSOFT Residential and Commercial Property Management Software, specializing in innovative and cutting-edge property management software for all 50 states. Request a demo or contact us today to receive more information.
Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.