Is it Time to Raise the Rent?

By E-Renter Tenant Screening
Posted on January 16, 2012 under Landlord Tips, Rental Market | Be the First to Comment

The rental market has been very good over the past year or so, and economists say that’s expected to continue—at least for the near future. But economists also predict more renters becoming homebuyers later in 2012, as employment increases and the housing market finally starts inching its way back from the seemingly bottomless pit it’s been in.

If you haven’t raised your rents during this landlord’s market, you may be thinking about doing so, before the pendulum swings back to the tenant’s favor. Here are some simple steps that can put more money in your pocket and keep good tenants from moving:

• Study your market rents. There are a number of online tools you can use to check comparable rents in your area. You need to know whether your rents are in line with, above or below market. Obviously, if your rents are above market, you should rethink the plan to raise them any further.
• Review your expenses. Have the costs of maintenance, insurance and other business-related expenses gone up? Take this into consideration when setting your new rents.
• Determine which tenants you really want to keep, and which you think you could replace with better quality tenants. You may choose to lower the amount of the rent increase for great tenants that you’d like to stick around.
• Examine your lease records to determine which will be up for renewal in the next 12 months. What does your lease or state law say about rent increases? Do you need to give a tenant 30, 60 or 90 days’ notice if raising the rent at lease renewal? 30 days is usually not enough for a tenant to make a decision to move and let you know they will not be renewing. The longer notice you give, the better your relationship with your tenants will be.
• Formulate a plan. Decide how much of an increase is fair, based on market rents and the tenant’s history with you. If you really want to keep a good tenant, think about a smaller increase. You can also be ready to offer a longer lease at the new rate—18 months, for example—so the tenant can be assured that the rent will remain stable for a longer period of time. Have your market data ready to show tenants, so they know they’re still getting a good deal.
• Prepare a well-written notice. Be sure to thank your tenants for their business and for being good tenants. Let them know the amount of the rent increase and the process for lease renewal. Soften the blow by letting them know that your expenses have increased, that you’ve studied the local market and are keeping rents within the average range. Typically, if the tenant does nothing, the lease renews at the new rate. If tenants give notice, let them go and replace them with new tenants who will pay the new rent.

Of course, keeping a good tenant is always better than the expense and trouble associated with finding a new, qualified tenant. Keep this in mind when determining the amount of your rent increase. Follow these steps and you can be on your way to painless rent raising!