16 Apr Raising Rent the Right Way
Raising rent allows for keeping your rent prices in line with the market. You first need to figure out if raising rent is possible, because during the lease terms, the rate for a rental property is fixed for the duration of the lease. For this reason, rent increases are generally done upon lease renewal.
COVID-19 has created devastating circumstances for many families across the country, and it is important to keep this in mind when considering a raise in rent.
A month-to-month lease agreement allows you to raise rent at any point, as long as a notice has been given at least 30 days (sometimes 60 days) in advance.
There are also places that are under the government’s jurisdiction and are considered “rent controlled.” In these areas, there is a high chance you won’t be allowed to raise rent. Rent Controlled areas aren’t always bad, though. Don’t steer clear of these places just because they are rent controlled.
Should I Raise My Rent?
Looking at the local rental market is the easy way to determine if it is time to increase your rent. Compare your property to the available properties at the time you are considering an increase in rent prices. If there are other units that are smaller, or offer less amenity options, that may be a sign it is time to raise your rent.
Most tenants expect a rent increase at the end of the lease terms, so as long it is done correctly, the change will be expected.
How much notice to give:
It depends on where your property is located, but it is usually either 30 or 60 days. Local laws determine the acceptable time period for notice on rent increases.
How Much Am I Allowed To Raise My Rent?
For example, a $100 increase will net you an extra $1200 annually. This being said, if the tenants decide to leave because of the increase or you’re forced to do an eviction, the turn around time may eat up that extra revenue.
One idea is to split the difference with the tenants. Most tenants will decide to stay if the rent increase is under $50, as they are usually able to keep up with payments even after the increase.
Follow What Professional Marketers Are Doing
Another option would be to give the tenants options instead of naming the price outright. Many successful businesses offer 3 tier pricing for most products:
- Small, Medium, Large,
- Bronze, Silver, Gold,
- Regular, Premium, Plus
By giving choices, people tend to compare the choices they are given, instead of comparing to other companies or competitors.
An example would be getting coffee at Starbucks. With the 3 different sizes having 3 different prices, people compare the prices of the different options rather than comparing it to the Dunkin Donuts across the street. There are other reasons that someone would pay for the more expensive product other than price alone, but giving pricing options may give more attention to the options rather than the individual prices of each item.
This analogy isn’t directly related to rental prices, as you are not offering 3 options like size of a coffee. An idea to give options to the tenants would be to give rental term options such as one-year, two-year, or month-to-month, with different prices for each option based on the risk of each term.
