Whether the market inflates, unforeseen renovations arise, or the market value of your property increases, sometimes you have to raise the rent. However, the prospect of raising rent can scare property owners just as much as tenants, as rent price increases often result in vacancies. However, if you raise rent prices the right way, you can mitigate how many tenants you lose and even encourage everyone to stay. Read on to learn more about how to raise rent and still keep your tenants.
What To Consider Before Raising Rent Prices
Before you begin raising rent prices, you need to be intimately familiar with your state and local ordinances. Some states have very specific caps on how much rent you’re allowed to raise at a given time. Other states have no cap and allow you to raise rent without having to give legal notice. It’s also important to note that you’re raising the rent and the security deposit when the deposit depends on the monthly rent amount. It may be wise to acclimate your tenants with slow and incremental increases rather than increasing the price all at once.
Raising the rent price in increments is smart, especially if your property exists in an already competitive market. A flooded or competitive market means your tenants are more likely to leave on a dime if they’re unhappy with their current situation. Shocking them with a large and sudden increase is a quick way to get them to do just that. If you can’t access local statistics, talk to other realtors, rental agents, and property owners to learn their prices and vacancy rates.
Determine Why and How Much Rent To Raise
To make sure that your rent increase is of the most benefit to you, you should look at your budget and determine why you’re making this rent increase. This is so you can consider how the rent increase is going to affect and comply with utility costs, property taxes, maintenance, and insurance premiums. Ideally, at some point, you’ll inform your tenants about why you’re raising your rent, as this transparency can help you retain tenants.
Additionally, it is a good idea to only raise your rent about 3 to 5 percent per year. This will limit tenant turnover as possible while still meeting the needs of your current budget. However, remember that the increase in rent should reflect the property. If tenants find that the increase doesn’t reflect the quality of their unit, they’ll consider leaving. So be sure that you’re keeping the ratio between quality and quantity fair and balanced. Tenants are likely to stay and pay more if they see their money going to some form of improvement.
Inform Your Tenant You Are Raising the Rent
As mentioned previously, some states do not require you to give your tenants notice before raising rent, but some states do. Always check your state and local ordinances before proceeding with the rent increases. However, regardless of whether your state requires that you give an increase notice, it is in your best interest to inform them in a timely manner. In most cases, you’ll find that the required minimum is a 30-day notice. However, you may want to give them more time to plan and gather the expenses. Ninety days is a fair and reasonable amount of time; the more time you give your tenant, the more likely they are to stay.
Additionally, a tenant will have time to notify you if they need to terminate their lease and move out. This way, you can get the jump on marketing the rental to shorten the vacancy gap. However, if you’re doing a 90-day increase notification, be sure to give another reminder or two throughout the passing months. This will mitigate any chance of a tenant saying they weren’t aware of or forgot about the rent increase. If you don’t want to have to send out multiple reminders, you can require that the tenant send back a confirmation that they received the notice. This way, you can have a digital or physical record that they are aware of the rent increase.
It will also be of interest to you to time your rent increase appropriately. If you send out the notice that you’re increasing rent in October, effective at the beginning of December, this can cause animosity. People often spend the most money during the holiday season, so increasing your rent during this time is bound to irritate tenants. However, the peak moving months are June, July, and August, so you may want to avoid raising rent prices at this time too. The slowest and easiest times to raise rent are at the end of summer and the beginning of fall. These months are typically when younger people settle in for the school year and holiday costs have yet to take effect.
Learn How To Write an Increase Notice
When writings a rent increase notice, you want to be as explicit and clear as possible. Do not, under any circumstances, give your tenants a vague or roundabout estimation of how much they’ll pay. Even if you have already notified the tenant in person that you intend to increase the rent, you should still send out a physical notice to keep a record.
Examples of critical information to provide to tenants include:
- The mailing date of the notice
- When it becomes effective
- How much the price will change
- Reasons behind the rent increase
At first notice, tenants are likely to complain. It may be beneficial to fully explain in detail why you’re raising the rent on the increase notice. You can also include the laws that allow you to raise the rent. Generally, an informed tenant is a much happier tenant.
Find Ways To Keep Tenants Happy
If you have the ability, talk to your tenants. Have an open, honest, and mature dialogue about their needs and ability to meet the rent requirements. You may find that it’s worth making some concessions, such as offering a deep clean of the property, upgrading utilities, or making other beautification upgrades. Remembers, tenants are not likely to stay if they feel their rent increase is going straight into your pocket, even if it’s not true. Remaining open and honest about why and how the rent is increasing is the best way to raise rent while still keeping your tenants.
Overall, property owners have many roles they have to juggle. If you’re struggling with your responsibilities, Excalibur Homes is an experienced property management company in Decatur, Georgia, that can help. We dedicate ourselves to making life as a property owner as easy as possible.
