The Smart Way to Raise Your Rent

Like all other industries, the real estate rental market responds to economic trends. At times, the economy may trigger a reduction in rent. Other times, however, you may have to raise the rent to match the rental market, cover property maintenance or improvements, meet tax increases, or to maximize your profits.

Before you raise your rent, make sure your rent increase complies with state and federal laws as well as the terms of your lease. That should always be your starting point before you raise the rates.

When to Increase Rent

In most states, you are legally allowed to establish a rent increase in between tenants, lease terms, or if your client is under a month-to-month agreement as you long as you give proper notice. Avoid increasing rent prices during a lease term unless the lease explicitly states that you can increase the rates and under what conditions you may do so. 

Most real estate experts recommend that you increase the rent at least once per year in a month-to-month agreement. Otherwise, you'll want to wait until your lease agreement has expired. Either way, an incremental annual increase is better than an exponential jump in rent every three to four years. Tenants are likely to agree to a small $20 bump instead of a sudden $250 hike.

How Much Should You Increase the Rent?

When deciding how much rent you should charge, consider several factors. For instance:

• The highest possible rental income
• Maintaining a competitive price point
• Attracting the best tenants
• Rent control or rent stabilization laws
• Increase in HOA dues
• Cost-of-living increases

Be methodical and intentional with your rate increase. You may want to start by establishing a competitive rate with the local markets. Work with your property management company to conduct a rental marketing analysis (RMA). What are similar properties in your area going for? What improvements do you need to make to the property? What amenities do you offer compared to amenities with other properties?

You can also multiply the consumer price index (CPI) by your current rental rate. An index shows the variation of prices paid by typical consumers for comparable rentals. If the index increased by 2.5 percent, multiply your rental by 2.5 percent and add the amount to your current rent.

What Happens When You Receive Tenant Backlash?

Once you've announced your rental rate increase, you need to prepare to justify your actions. Regardless of your reasons, a rent increase will likely draw questions and possible criticism from your tenants. Therefore, you need to communicate your rate increases and provide legitimate reasons for why the rate is higher. For instance:

• Are you matching market prices?
• Do you offer new amenities?
• Are you updating the property?

If you keep your tenants informed as to the reason behind a new, higher monthly rent, they will be more willing to adhere to your changes.

New Tenants vs. Current Tenants

You may have more success raising your rent if you wait until you have new tenants. Current tenants could cause more push back. You may also experience high tenant turnover if you suddenly increase your rental rates.

Therefore, you need to be financially stable before you raise your rent your rates. Several tenants could either break their lease or fail to renew. If you experience a high turnover rate, it could take several months before you secure new tenants.

Work with Your Property Management Company

One of the best ways to ensure that a rent increase is a smart idea is to work directly with your property management company. An Everest Property Management professional can meet with you to discuss all the factors that affect your rate increase.

We can help you outline a strategy for increasing your rates, communicate with your tenants, and develop a smooth process.

Property Management Services in Palm Coast

Everest Property Management is a Palm Coast-based company that helps people find homes to rent and manages properties for real estate investors. We work with investors to identify investment opportunities in the Palm Coast area. By partnering with our property management experts, you can get a higher ROI out of your property.

To find out more about our products and services, call us at 386.246.2085. You can also message us on our contact page.Learn the smart way to raise your rates if you are a landlord or investor looking to raise the rent on your properties. Our guide shows how to maximize tenant retention and profits. A property management company in Palm Coast, Florida can help you find the best rates.