Raising your tenant’s rent can be one of the most stressful and tense interactions you’ll share. Keeping a good tenant is incredibly valuable, but you’ll also want to maximize your earnings and profit on your property. This difficult situation causes landlords to be afraid of raising their rent because they don’t want good tenants to leave. Jensen Properties has years of experience in lease negotiations and renewals. We’ve developed a system to keep owners and tenants happy throughout their tenancy. Here are a few tips we recommend to make raising your rent a much easier task.
Right Time and Right Amount
A common mistake landlords make when raising the rent is to lack consistency in their rent increases. Inconsistency can cause your property to fall below market price, which then leads to monetary loss over the long run. If you then try to make up for the lost money by raising the rent several hundred dollars, you’ll find your tenants extremely unhappy and at risk of moving out.
The correct time to raise rent is at the end of a lease and the start of a lease renewal, which is usually every 12-months. Tenants should then expect to receive a rent increase every year, at the end of their lease. The rising cost of living and inflation are a fairly easy way to justify a rent increase every year.
Follow your local laws regarding rent control and work within the law. Just because you can raise the rent, doesn’t mean you should. A higher rent increase can lead to more move outs. You should also consider the tenant’s options. If the rent increase puts your property at the same price as a newer property, your tenants will be incentivized to leave you for the newer property where they will pay the same amount but possibly receive a home with fresh paint and new appliances. Keep It Friendly
You don’t need to know everything about your tenant, but maintaining a good relationship with them can make rent increases easier. Communication is important. Make sure you’re answering all their questions and concerns in a timely manner so they don’t feel neglected or ignored. Don’t let repairs sit for too long if they need to be completed. If a tenant likes you and the way things are running then there will be no reason for them to leave.
Tenants will feel more important if you can remember a few key things about them. Ask about their hobbies, family, recent events. Remembering small details shows you’re paying attention and see them as a person, not just a tenant.
You should try to keep up with the rental market but it’s just as important to listen to and be reasonable with your tenants. As an example, if you increase rent by $60 and your tenant is unhappy with it, you may be able to keep your tenant by negotiating. If your tenant says they will sign another year but they’d like their carpets cleaned, it may be worth the expense. A one-time expense of $80 for carpet cleaning will be worth it in the long run. $60 for 12 months will gain you an extra $720 a year.
Alternatively, if you increase rent by $60 and your tenant makes a counteroffer to increase rent by only $45 dollars, it may be worth it to take the deal instead of having them move out. You would only be losing out on $180 then and it’s important to remember that move outs can be very expensive. Typically, a standard turnover costs about $3,000.
Let Them Think About It
It’s most beneficial to let tenants know about a rent increase sooner rather than later. Giving them a notice 60 days before their lease expires gives them time to decide what they want to do. This may result in them negotiating with you. Nevertheless, you should ask for a final answer from them 30 days before the end of lease.
How Jensen Properties Can Help
Rent increases can be stressful... But they don’t have to be! We evaluate rent prices annually and consistently work to increase the return on your investment. Explore our website and find out for yourself how Jensen Properties can make your real estate dreams a reality.