Here are a few key considerations to help you raise rent while keeping loyal tenants happy and protecting your real estate investment.
It’s no secret that rents are on the rise. For landlords, the challenge is maintaining a competitive rental price while balancing tenant expectations. Here are a few key considerations to help you successfully raise rent, keep loyal tenants happy, and protect your real estate investment.
According to the real estate research firm CoStar Group, rent across the U.S. rose a record 11.3% in 2021 — and hasn’t slowed down since. New research shows that nationally listed rents for available apartments rose 15% compared to last year, while the median rent rose to about $2,000 for the first time ever.
When navigating today’s housing shortage and high inflation, many landlords have no choice but to raise rent to stay profitable. The challenge? Knowing how to adjust rental prices while still retaining loyal tenants. Keep reading to learn best practices for raising rent — without raising complaints.
If you’re a landlord considering making a rent increase, it’s important to do your due diligence and understand real estate laws around rent pricing. In many cases, state and local laws dictate when you can raise rent, how much notice you need to give tenants, and more.
So, when exactly is it acceptable for landlords to raise rent? The three most common scenarios are:
State and local laws often specify a maximum allowable dollar or percentage rent increase. They may also outline a minimum notice period for telling tenants about the change (usually at least 30 days before the rent increase goes into effect). Some cities may even require you to pay for your tenant’s relocation costs if you raise their rent over a certain amount.
As a legal contract between landlord and tenant, a lease sets clear expectations for both parties. To ensure everyone is on the same page about rent, a lease states the fixed price your tenant will pay in a given period. Tenants will expect this rate to stay the same unless it’s specifically outlined as subject to change, or if they must sign a new lease to renew their stay.
For many landlords, it makes the most sense to adjust rent prices in between tenants — that is, after one moves out and before someone else moves in. That way, your new tenant enters the agreement with clear expectations about the price from the beginning of your arrangement.
Even if landlords are eager to raise the rent price for an investment property, there are a number of circumstances that can restrict them from doing so. These include:
As mentioned earlier, whether or not you can raise rent depends on your state and local governing body. Make sure that your rent increase adheres to local rent limit requirements and rent control laws. For example, some states may not allow the price to rise more than a certain percentage each year.
When tenants sign a lease, they’re agreeing to pay a fixed price over a specific period of time. While some leases may allow rent increases mid-lease in certain cases (e.g. if you make property improvements or introduce new amenities), landlords typically cannot adjust rent mid-lease.
In many cities, rent control laws are a method of regulating the housing market. While laws vary by state or municipality, rent-controlled properties have a cap for the maximum rent per unit, as well as the amount rent can be increased annually.
Remaining profitable in a competitive market requires a sound investment strategy — not to mention sensitivity to the market conditions your tenants are facing. That’s why it’s important that landlords have a plan of action when they raise rent. Here are six proactive practices to keep tenants feeling informed and supported:
Your tenants shouldn’t be blindsided by an increase in rent. It’s essential they have enough time to consider their finances, adjust their budget, or prepare to find new housing long before their lease ends. By giving them a chance to plan ahead, you demonstrate that you care about their living situation and don’t want to put them in a tough position.
It’s important that tenants receive written notification about a rent increase; it may even be required by local law or your lease agreement. Be clear, concise, and firm about communicating the new cost of rent and when it will go into effect — this way, tenants won’t feel confused or uncertain about the future of their housing.
It’s no secret that inflation is at an all-time high. As a landlord, it’s your responsibility to remain attentive to market conditions and ensure your rent is competitive with the market but not out of reach for tenants. Over time, reevaluate your rent prices and adjust pricing in accordance with the market and your neighborhood’s rates.
Instead of dramatically increasing rent, consider making small, reasonable increases over time. For example, some landlords increase the rent 2% or 3% each year. For tenants, this is more financially feasible than a sudden 10% increase.
The best way to manage tenant expectations is to give them all the information they need from the outset. In your lease, be clear about your expectations and the possibility of a rent increase. That way, tenants won’t be surprised if something changes when they’re preparing to renew.
Part of being a successful landlord is giving tenants a positive living experience. If you’re going to raise rent, making upgrades or repairs to the property demonstrates you care about delivering a great tenant experience — while also increasing the value of your rental property.
By remaining attentive to market conditions, adhering to local laws, and creating an open line of communication with tenants, landlords can balance profitability with tenant satisfaction. And with an experienced partner like Azibo on their side, modern landlords stand an even better chance of succeeding in a competitive market.
Simplify the process of raising rent with a partner that understands the rental market and supports you throughout the rent collection process. Try Azibo’s free platform for landlords today.
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