How to Increase the Rent on Your Rental Property without Backlash from Tenants.
Rent increases are just part of the rental property business. Landlords have to increase rent to ensure they cover costs and maintain cash flow. Many Landlords ask this property management company about rent increases, as they want to make sure they do it correctly without legal ramifications. Some landlords are not sure how to go about a rent increase without backlash, or how to increase the rent and make sure the tenant doesn’t bail out at the renewal. Here are 8 simple tips to help you raise the rent, avoid tenant backlash, and maintain cash flow.
- Know the law
Always know how to perform a rent increase legally, as not to get yourself in hot water.
Knowing how to perform a rent increase will keep you in the safe zone. Consult an attorney, or laws in your jurisdiction on the subject that will provide you with everything you need to know from this aspect.
- Know the current market rates and comps
It is important to do your research. Know what the current trend is, and know what the current market rates and comps for your property are. This will provide data to know where you need to be, and or where you can be with your rent. If the tenant does not like the rent increase, and they start to look around, they may see that they are better off staying since other options are comparable. For a tenant, when rents compare closely, it is easier for them to stay put, rather than make a painstaking and time-consuming move. Do your homework and use rent comps.
- Send written notice
In California, if the rent increase is less than 10%, you must provide 30 days’ advance notice before the end of the lease. If the rent increase is more than 10% you have to provide notice to your tenant 60 days in advance of the end of the lease, or change. All of this must be done in writing, then make the increase part of the new lease agreement. It is, however, recommended that you build a good relationship with your tenant and perhaps call them to notify them. Be friendly and explain the increase. However, even if you call, you will still have to send a written notice within the time frame stated for your legal jurisdiction.
- Make some improvements
Make some reasonable improvements so that they feel an increase is valid. Ask the renters about some upgrades they might like, consider them and the cost. If they are reasonable, make the changes. If you have made some of the changes, it is easier for a tenant to swallow and accept the news of a rent increase.
- Increase the rent as turn over happens
This is, of course, the easiest way to increase rents. Every time a tenant leaves, increase the rent for the new applicants. However, if you have done a great job as a landlord or property management company, you will have long-term tenants, and you will now have to read and follow the rest of this awesome article.
- Raise the rent every year
Consistency is the best policy. When things are consistent, the tenant expects it, making it painless year after year. Even if it is slightly higher, over time you will be more than happy with the increase, and so will the renter. However, pay attention to rent comps. Raising the rent consistently is great, but when you raise it more than the rent comps, you risk your renters looking at the same housing for less.
- Don’t hit tenants with a huge rent hike
A lot of people can’t handle a large increase in their budget. Up to 10% is fair. Huge rents hikes can be seen as greedy, especially when they are more than the rent comps for similar housing. If you raise the rent too high at once, expect your renters to take a hike.
- Offer to reduce the rent increase
Instead of the full increase, if they sign a longer-term lease agreement, offer to lower the amount of the increase, or offer options such as, Option A. 1 year lease agreement equals X increase and Option B. 2 year agreement equals X, which is less of an increase than Option A.
Review these tips wisely. Putting them in perspective and practice will help you in maintaining and increasing cash flow. Raising the rent is a natural course of the rental property business, and most tenants expect it within reason. If you have any questions or want to discuss our property management services for Corona, Temecula, Riverside and property management in the Inland Empire in Southern California, give us a call, we would be glad to assist you – 951-520-0058