​4 Non-Sneaky Ways to Raise the Rent Without Upsetting Your Tenants

Rent hikes can be an uncomfortable situation for both tenants and property owners. There’s always the risk of a confrontation, or worse, a vacancy. As a result, some investor-owners avoid raising the rent simply because they don’t want to deal with the potential negative consequences - even if an increase is perfectly reasonable.

As they probably already know, however, this is a really bad move. When an investor doesn’t periodically raise the rent to stay on par with market rates, they’re seriously curtailing their own profit potential. They’re also more or less telling their tenants that their attitude regarding the property is basically “meh.”

To avoid this and keep profits where they should be, it’s imperative that you review the rent once a year to see if an increase is applicable. To do this, you need to ask yourself three basic questions: 1. What are the rates for comparable properties in your area? 2. Have you upgraded the property in any way that could justify a rent increase? 3. Is the tenant asking for additional amenities, such as laundry facilities or something else that could result in needed renovations?

Based on these questions, if you can determine that a rent increase is warranted, you must do it. Breaking the news to your tenants may not be the most fun job in the world, but it’s gotta be done. Here’s how to make it a bit less painful:

1. Be Reasonable. This is pretty self-explanatory. You must keep your rates reasonable and in line with similar properties in your area. If you don’t, you’re not going to be competitive and you won’t be able to get tenants. It also won’t do to surprise your tenants with a huge rate hike, just because you haven’t been increasing it periodically over the years like you should have been. If you’ve owned the property for 5 years and have never increased the rent, it’s not fair to combine those 5 years worth of increases and say, “By the way, rent is now $1,500 instead of $1,000.” This will upset people, and rightfully so.
2. Provide Justification. In addition to being reasonable, it’s also important that you be able to provide justification for why you’re raising the rent. If your tenants ask what’s behind the rate hike, you should be able to offer specific reasons, such as higher comps in the area or because you did x,y,z to the property to upgrade it and it now commands a higher price.
3. Maintain Goodwill. It’s always important to keep things pleasant between you and your tenants, but this is especially true when it comes to taking on tasks such as raising the rent. If you’ve cultivated a good relationship with your tenants, they will be much more open to understanding and accepting the rent increase because they like and trust you. When it’s time to notify them of the rate change, how you approach them can also have an impact on the outcome. Be open, honest, and understanding of how this will impact them, but stay firm.
4. Offer an Incentive. Finally, some investors choose to offer some kind of a kickback, or incentive, to help soften the blow. For example, you might offer to have the carpets professionally cleaned or an appliance upgraded once they sign the new lease. This isn’t a route that all property owners take, but it can definitely help if you’ve got a good tenant you want to keep and are concerned the rent hike will scare them away.

Raising the rent does not have to be something you dread. Remember, you’re running a business here. You’re investing in property to make money, not friends, and there will undoubtedly be times when you and your tenants don’t see eye to eye. However, rent increases are an important part of keeping your profits where they should be, and most tenants realize that they’ll be faced with a rent hike from time to time. It can be helpful to “train” your tenants to expect these increases at a particular time each year, that way they’re not surprised. Following the guidelines above will also help keep the hard feelings to a minimum, and hopefully result in a smooth increase process that everyone can be satisfied with.