Raising the Rent: The Landlord’s Guide to Successfully Raise Rental Income
Unfortunately, real estate costs rise over time, from property tax bills to insurance premiums to repairs and upkeep, so landlords sometimes need to raise tenants' rental payments. Raising tenants’ rent can prove a challenging conversation for many landlords, so here are a few suggestions to help make this discussion a successful one.
Tip 1: Planning Ahead
Many states require advance notice of at least 30-90 days when raising rent. Before saying anything to the renter, double check your state's landlord-tenant laws. Having the conversation sooner rather than later gives you an opportunity to find a new tenant, creating a smooth transition if the rental increase is not accepted.
Tip 2: Face-to-Face vs. Phone?
While it may seem easier to have this conversation by phone, the fact is human beings are less likely to say “no” in person, making a more personal face-to-face conversation an effective approach. That said, it comes with the risk of an altercation – use good judgment and knowledge of the tenant's temperament to decide whether to call or meet face-to-face. Regardless, always send a written rent increase notice as well, to create a paper trail and satisfy requirements for written notice.
Tip 3: Spring into Summer
Statistically, many more Americans move during the spring and summer months, which makes it far easier to fill vacant rental units during these warmer months. By sending notice in the winter of an impending increase in rent coming in spring, you can ensure an easier time leasing the property to a new tenant if your current tenant decides to move out instead of paying the higher rent.
Tip 4: Optional Longer Rental Agreement
How ideal… higher rental income and an extended rental agreement term, securing a rented property for the next two years! When a tenant expresses their unhappiness regarding a rental increase tell them you understand that they have their own bill planning and financial concerns, and that you're willing to sign a new rental agreement locking in the rent for the next two years. This will offer them written assurance that you will not raise their rent again for a while, and secure a good tenant for several years to come.
Tip 5: Research Market Rents
It is far easier to raise the rent if you're raising it to a reasonable market level, near other local rents. Find out what other local landlords are charging for similar properties, and if your tenant balks at your raise in rent, show them the data on what they can expect to pay for similar rental properties in the neighborhood. It's also a good exercise for you, to keep you up to date on your local rental market.
Implementing rental increases may not be an easy task, but it is often necessary if you intend to actually earn a positive cash flow on your investments. Always remember to be fair and honest, remember that rent cannot be raised in the middle of the lease term, and remember that sometimes securing a longer-term tenant may be more valuable than an extra $25/month.