Ways On How to Raise the Rent without the Blow-back
As a property owner you need to raise the rent to protect and improve your bottom line, but raising rents is never easy.
It can be a delicate issue. Being too aggressive may cause tenant turnover, and you’ll incur costs associated with vacancy. On the other hand, as your fixed costs like maintenance, insurance and taxes are rising, you have no choice but to raise the rent to keep your profit margin where you need it to be.
Schedule Regular Increases
Increasing rents will be less of an issue if your tenants are expecting them. An annual increase of 2%-5% is reasonable and won’t send shock waves to your tenants. That said, if you have a long-term renter that you would like to retain, waiving the increase can be a smart option. If you have multiple houses/units, keeping loyal tenants is worth it. It may even save you money in the long run.
Some states like California and New York have strict controls over rent increases. But in states like Michigan, a landlord is free to raise the rent whenever they see fit. However, landlord who priced their units beyond what the market will bear will likely suffer vacancies.
Check the Competition
You don’t want to out-price your properties, so do some recon, and find out what your competitors are charging to make sure you’re not over or under-priced. Just be sure to compare apples to apples and don’t overestimate what your property really is.
Send A Notice Long Before Renewal
State laws vary, but most require an increase notice 30-90 days prior to lease expiration/renewal. As a property owner, it’s in your best interest to notify tenants within a reasonable amount of time. While you should be courteous, you don’t want to give them too much time and increase the likelihood that they’ll move. Consider providing a new lease with your written notice. On the flip side, if they decide to move out, you will have additional time finding a new tenant.
Ways to Soften the Blow
Property owners know that long-term tenants are worth their weight in gold. There are still ways to offset the hurt of an increased rent. One way to retain them while still increasing the rent is offering them a discount for a multi-year lease.
Tenants may also take rent increase easier if they feel that they are getting more for their money. Consider making some upgrades that will increase their perceived value. Maybe the kitchen or bathroom is due for an upgrade anyway. For the cost of a few appliances or bathroom vanity, which you were going to do anyhow, you’ll be able to retain a few loyal tenants.
Rent hikes are necessary to stay profitable as a property owner. Tenants don’t like to hear that they’re going to pay more, but they won’t pack up and leave if the increase is reasonable and they are happy with your property. The bottom line is that you have to do what you have to do and you don’t owe your tenants an explanation — you only need to give them notice.