Raising Rents the Right Way

All too often we see property owners making the mistake of not raising rents in relation to the market and falling behind for fear of turnover or not wanting to be perceived as the “bad guy” in tenant relations. The problem here is that as an owner your expenses are rising with inflation. Real estate is one of the best investments out there to hedge against inflation so by not consistently raising rents you are diluting the returns.

Savvy property owners know the best way to secure market rents is to provide a clean, well maintained, and safe space in which their tenants can enjoy all the benefits to the property outside of actual ownership.

So here are the keys to raising rents the right way:

• Consistency- Raise rents incrementally and consistently as market conditions allow. This is especially important in areas with rent control as any deferred increases will not allow for owners to keep up with rent growth. Once you forego an increase it is unlikely that you will catch up prior to turning the unit.

• Timing- Timing is also important as annual increases allow tenants to know that rent increases can be counted on at a certain time of year. It is best to coincide with seasonality for when demand is higher such as spring & summer. No one wants to deal with turnover in periods of low demand such as Thanksgiving through New Year’s.

• Market Conditions- Always base increases on current market conditions by conducting rent surveys in the area through online platforms such as rentometer.com. Also be sure to assess current vacancy rates and whether rental rates are increasing or softening. Sometimes property owners make the mistake of pushing for top of market rents in a softening market. This is a poor strategy that inevitably results in higher turnover costs.

• Be Creative- Consider offering small improvements or upgrades to maintain the units in better condition to secure market rents. Avoid the mistake of deferring maintenance if you expect your renters to pay competitive rental rates.

• Transparency – Explain to tenants that expenses are going up and reference specific examples such as maintenance costs, property taxes, insurance, and utilities among others that they may not be aware of. Be sure to remind them increases are necessary to keep the property well maintained in which they reap the benefits as well.

Remember, it is best to be fair with renters as ultimately keeping the best ones is good for your bottom line. You will be surprised how amenable your tenants will be towards paying a competitive rate for the peaceable enjoyment of a nice and well-maintained environment in which to call home.