Tips For How To Increase Rent
For landlords, raising the rent can be a touchy subject. There are times when rent increases are necessary to keep up with rising costs of property ownership, yet a rent raise can spook renters from renewing their lease. There are ways to raise the rent while decreasing the sting for renters. If you can keep renters happy and protect your interests, your renters will be more likely to stay.
How to Handle a Tenant Rent Increase
Savvy landlords are always keeping their rents in line with market rate by adjusting rent amounts every year. Tenants are less likely to balk at a slight rent increase ($50 or under) than they are when the rent goes up by hundreds of dollars overnight.
A good rule of thumb is to raise rents by 2 to 4 percent annually. For a $2,000 apartment, this works out to $40 to $80 — a number not likely to spook renters.
When you increase the rent by a small amount each year, you acclimate renters to this trend. If they don’t like it, they’ll leave. Otherwise, they will come to accept a small rent increase each year and will be much less likely to complain.
While you should strive to be competitive with market rates and recoup the costs of maintenance and mortgage payments, you will lose renters if you increase the rent by more than 8 percent in a year. This may be unavoidable if you’ve delayed a rent increase for several years. If that happens, start fresh with new tenants who can afford the higher rate. Then, commit to incremental raises each year so you don’t fall behind again.
If tenants try to negotiate with you, consider an incentive that benefits everyone. Rather than renewing their lease for 12 months at your higher rent rate, ask them to sign a two- or three-year lease at a number that splits the difference between the old rent and the new rent. They’ll be relieved they don’t have to pay as much, and you’ll enjoy stability for the foreseeable future.
Apartment turnover is a common time to lose money, as landlords often use the occasion to make property improvements, spend money advertising, and invest a larger amount of time in managing their property. The less often you turn over apartments, the more profitable every property is — even if you could be earning $25 or $50 more in rent.
Invest in Your Tenants
Always be cordial and responsive when you see or hear from your tenants. A smile and greeting go a long way in building a positive relationship. Most tenants have had shady landlords, so they appreciate renting from someone who cares about the property and his or her renters’ satisfaction. Even if they dislike a rent increase, tenants who have warm feelings toward their apartment and their landlord are more willing to pay a little more to maintain their quality of life than move out over a bit of cash.
For more tips on how to increase tenants’ rent without incurring turnover, access to landlord webinars, and discounts on property management, become an American Apartment Owners Association member. View all member benefits or join today.