The following post was written by staff writer, Peter.
How to Raise Your Rent without Losing a Tenant
Good tenants aren’t always easy to come by, and few things are as important in a rental property business as securing a great renter. For landlords, it can be a delicate balance when necessity or desire inspires you to increase the rent, as losing a tenant can mean a costly vacancy. If you’re looking for ways to increase your profits, these tips and guidelines will help you raise the rent and improve your chances of retaining a great tenant.
The Lease Stipulation
Before we get started, you need to ensure you have the right lease stipulations that will allow you to raise the rent before landing yourself in a hairy legal situation. Usually these stipulations allow you to increase the rental at lease renewal, so if you don’t have this included, you might be up the creek without a paddle. Most states have strict rules regarding rental increases, so if you’re concerned, it’s always a good idea to check with a local property management company that can give you the lowdown on all the most recent updates.
The Rising Costs
If you’re debating whether or not you should raise your rent, consider the rising costs of upkeep that will steadily increase with each passing year. Everything from insurance premiums to utilities appreciate, and you’ll have to cover those costs on your own if you don’t increase the price of your rent to reflect that.
Prepare an Explanation
Don’t expect your tenants to smile and nod when you tell them you’re increasing the price on their living situation. Before going in, consider exactly how you’ll explain the rate hike, and it can’t be “I want more money”—even if that’s the main reason. There are a variety of valid explanations for an increase: the cost of living has risen, taxes have increased, or inflation. Beyond this, property value might have skyrocketed, or you could need more money to perform improvements and repairs. You might have another reason for your rent; regardless, as long as it’s a reason that can be backed with evidence, you’re less likely to encounter pushback from your tenants.
Give Plenty of Time
You’ll need to give your renters advanced notice of your plans to increase rent prices. Not only will this give them time to decide whether or not they want to continue renting from you, but it will also provide you ample time to secure your next tenants should they choose to leave. This is also a step you must take to follow state and local regulations, so do yourself a favor and inform your tenants of your plans at least 45 days in advance.
Experiment with Advertisements
If you want to test the waters and determine whether your price increases are valid, post a listing for your property with the new price. If you receive interest, you’ll know your price is fair and you’ll have that argument on your side when it’s time to present your proposal to your current tenants. It might be likely that they already realize they’re getting a deal, so the discussion may be something they’ve expected. It will also serve as a great backup; even if your current tenants aren’t willing to pay more, you’ll have prospective tenants that will be more than willing to take their spot. You can also take a look at comparable properties, and find out what their going rate is for new tenants to give yourself a ballpark figure.
If you’re going to increase prices by a significant margin, you’ll need to ensure your property is up to par. Soften the blow of an increase in rent by offering your current tenants the option between some amenity upgrades. It could be new appliances, or maybe some landscaping in the front yard, or even updating a shower head and other hardware for an added bonus. It might not completely sell them on the idea, but upgrades will definitely serve you well as bargaining chips.
If You Lose Them
If your tenants decide to leave, there’s not much you can do. Don’t leave it to chance to find a good replacement. Instead of relying simply on a credit report, get all the details you can to make an informed decision. Sites like MySmartMove.com will provide you a credit report, alongside a criminal history notice and let you know if the potential renter has ever been evicted before.
Whether being a landlord is your full-time job or something you do for supplementary income, a variety of facets can factor into your decision to increase rent, even if you have wonderful tenants. Regardless of your relationship with your tenants, your rental property is a business; as such, it’s your prerogative to make it a profitable venture. Armed with these tips, approach your tenants in a smart, sensitive way to ensure you retain their tenancy while also increasing your bottom line.