How to Successfully Raise the Rent and Avoid Losing Good Tenants

If you want a better return on your rental investments, it’s important to understand how to tactfully and effectively raise the rent—without rocking the boat with loyal tenants. Rising property costs, as well as turnovers, can eat away at your profits over time. Before raising the rent, you’ll need to consider several factors, including market values in the area, vacancy rates, and whether the tenant will be able to afford the increase. With that in mind, here are five simple steps you can take to successfully raise the rent without losing good tenants.

Five Steps to Take Before Raising the Rent

1. Review Your Local Laws

The first step you should take when considering a rent increase is to review the local rental laws for the area your property is located in. State and local laws can vary quite a bit when it comes to raising the rent. In some areas, rent increases are prohibited, while other areas have rental caps that prevent the rent from being increased beyond a specific dollar amount or percentage.

2. Add Rent Increases to Your Lease

If your property is located in an area that allows you to raise the rent, your tenants may be expecting an annual rent increase. However, it’s important to make your policies clear in your lease agreement to ensure your tenants aren’t blindsided. Your original lease should include a section detailing rent increases, including:

  • The percentage or dollar amount of the increase
  • How often the rent will be increased
  • When the tenant can expect to receive a notice about the rent increase (typically 30-60 days before the rent increase goes into effect, but this can vary based on state and local laws)

3. Determine How Much You Can Increase the Rent

Next, you’ll need to decide how much to increase the rent. For this step, do some research to determine the market value of similar properties in the area. Make sure you’re not just looking at features like the number of rooms and square footage—you should also be taking the amenities into account. Once you have a good idea of how much similar properties in the area are going for, use those prices to figure out your new monthly cost. Keep in mind that if you raise the price too much, you could risk losing tenants.

When determining rent prices, you should also consider vacancy rates. Ask yourself the following questions:

  • Do similar properties in the area seem to stay vacant for long periods?
  • Have you had issues with finding new tenants for your units?
  • Is your rental located in an area that’s in high demand?

These can help you understand how easy it may be to find another tenant if they balk at the rent increase—as well as the overall demand for similar rentals in your area.

Another thing to keep in mind is that even if similar properties are charging more rent than you are, you don’t want to dramatically raise the price of rent to meet them. Substantial rent increases in between tenants are acceptable, but your current tenants won’t appreciate a dramatic increase. It’s common for rent increases to be between 3-5%, but this can depend on where your property is located, state and/or local laws, and the cost of your current rent.

4. Keep the Property Well-Maintained and Upgraded

Have you made some significant upgrades to your rental while your current tenants were living there? If so, this is an excellent reason to justify increasing the rent. However, if you’ve been neglecting the property and putting off maintenance and repair requests, a rent increase may give your tenants an incentive to move. If you’ve decided to increase the rent, upgrading old appliances or making requested updates may help them get on board.

5. Notify Your Tenants of the Rent Increase

Once you’ve determined how much you want to raise the rent, you’ll need to notify your tenants 45-60 days before the lease termination date.

Ideally, you want to be able to raise the rent while maintaining a good relationship with your tenants. For this reason, you should also consider what you’re willing to compromise to keep your tenant happy and continuing to rent from you. This could include repainting the apartment, complimentary parking, or other low-cost incentives. Once you and your tenant have agreed on the terms of the rent increase, you should both sign and date the rent increase notice. Keep this for your records so you have documentation for what was agreed upon.

Give Your Tenants a Reason to Renew the Lease

As long as a tenant enjoys living on your property and feels the rent increase is reasonable, they’ll likely continue to renew their lease for many years. Staying responsive, cultivating a good relationship, and making the rental process hassle-free are the best ways to keep responsible tenants and avoid vacancies.

Another way to avoid vacancies and keep your rental income flowing is to find the right tenants for your property. Whether you’re renting out one single-family home or a large multi-unit apartment complex, tenant screening is the best way to find reliable tenants and protect your investment. Tenant Screening Services offers a variety of screening packages that include credit, eviction, and criminal reports, as well as residential/employment verifications. Available online 24/7, our services are convenient and easy to use. Order your reports today, or feel free to contact us with any questions you have.

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