As a landlord, it’s your prerogative to raise the rent on the property as needed. As much as your tenants want to lock in the rates, you do need to make some increases to reflect the increasing market and rental property value of the unit and to keep up with the rising maintenance costs of the property.
However, before you decide to raise the rent, there are several things you need to consider. Make sure you can increase the rent legally. Here’s what you need to do.
- Follow your contract. Before you can increase the rent, you need to make sure that you aren’t breaking the contract by increasing the rent midterm. Just as you wouldn’t appreciate it if your tenant bails on the unit half way through the lease, your tenant won’t like it if you raised the rent before the term is up.
- Include a rental increase clause in your contract. When you have the contracts drawn out, you should include a rental increase clause. You may state that you have the prerogative to raise the rent by a given percentage of dollar amount every year or two depending on inflation and increasing property values. This way, you tenant won’t be surprised if you suddenly enforce a rent increase the following year.
- Check the going rates of similar units in the neighborhood. Don’t randomly draw out some number and declare that to be your new rental fees. You need to remain competitive. At the same time, the rental fees have to reflect the value of the neighborhood that you are in. You don’t want to make the rent too cheap that you bring in undesirable tenants to your property. At the same time, you don’t want the rent to be too high that it will turn off good renters.
- Check rent control laws in your city. If your city has rent control laws, then you must comply. In many major cities, if the tenant has resided in the building for a number of years, he is protected from dramatic rental increases. Check the laws in your city or state to make sure you comply.
- Notify your tenant. You need to give your tenant ample notice about your rent increase. Some cities require a minimum of at least thirty to ninety days written notice. This will give the tenant time to prepare for the increase.
- Avoid dramatic increases. Be reasonable. Even if you live in the most prime neighborhood in town, you want to make sure that your rent is still affordable. If you do more than a ten or twenty percent increase in your rental fees, your tenants will complain. Don’t do more than a five to ten percent rent increase. Also, space it properly so avoid doing annual increases if you can. It’s better to build a long standing relationship with good tenants than always trying to get a higher rent check.
- Implement the increase at the appropriate time. Be considerate of the overall economic climate before you make an increase in rent. You may lose your tenants if you decide to raise the rent during a recession. If you know that the tenant is having some financial difficulties due to life changes such as unemployment or a new baby, see if you can work out a staggered increase for them. Be flexible.
You need to strike the proper balance in raising and collecting the rent and providing your tenants with a clean and safe environment to live in. Before you decide to raise your rent, make sure that as a property manager, you are fulfilling your duties. Fix any and all problems in the unit or building so that your tenants won’t have cause to complain.