Nationally, the rent index is increasing at a rate of 3.6% per year. As a landlord, you are likely won’t keep the rent at the same rate forever. But some are afraid that raising the rent will mean that they have to find new tenants. This doesn’t have to be the case. There is a way, you can manage to increase the rent without losing your tenant if you do it right. Follow these.
Assess the Rental Market
Don’t just arbitrarily decide on a new rental rate and drop that bomb on your tenants. Take some time, and do a bit of homework to justify your rental rate increase. There are two aspects to consider here – the rental market in your area, and the value of your current tenants.
First, check out the rates for comparable rentals in your area. Then take a look at how your rental rates compare to the others. Of course, you should also take into consideration whether you have something special to offer in your rental property. If your rental property includes special amenities that the other comparable properties do not have, then you will generally be able to charge a higher rent. You should also consider the availability and demand for rental homes in your area and the current vacancy rates.
Next, consider your tenants. How long has it been since you increased the rent? If your tenants were to move out because you increased the rent, is that a chance you are willing to take? Would the cost of finding new tenants outweigh the potential value of increasing the rent? If you have an excellent renter, you may find that it is worth it to you to maintain your rental rates (or only raise them minimally) so that you can retain those tenants.
Justify Your Decision
You can be sure of one thing – your tenants won’t be happy that you have decided to increase the rent. It is likely that you will get some negative feedback. That’s alright; in fact, that is completely expected. You shouldn’t give in or change your mind, but you should be prepared to justify your decision with concrete information. There are many legitimate reasons for increasing the rent, including the following:
Increased property taxes and insurance costs;
Increased utility costs;
Increased maintenance costs;
Preparation for improvements to the rental space;
Length of time since the last rent increase.
Communicate Professionally
You can soften the blow to your tenants by communicating with them professionally about the rental rate increase. The lease that your tenant signed should spell out the requirements for how much notice must be given prior to a rent increase. Be sure to give at least as much notice as required. Although the tenant won’t be happy about the increase, early notification gives them the opportunity to plan ahead and budget for the new rate.
Inform the tenant of the increase in writing, on company letterhead. You can save yourself some time and trouble by also including an explanation and justification for the increase in the notification letter, rather than waiting to receive a complaint later on.
Choosing to increase the rent is an unpopular decision, but you can make the transition successfully if you follow these steps.
If you are a landlord and would like some help managing your rental property in Phoenix or Scottsdale area, call
McMath Realty
. We offer property management services, and we can handle all those pesky details, like rent increases.