Rent Increases and Mindset

If you want to protect the value of your rental property, you have to raise your rents every year.

We have just experienced the worst 3 years in our market in over 3 decades. Those who implemented yearly increases have been able to preserve the value of their properties and are in much better positions than those who did not.
For those who have not increased their rents during these challenging times, they're finding themselves in a serious predicament.

With tough times comes the thoughts of selling. The months of deficits have taken its toll and you want to sell. You sit down to analyze your numbers and your mouth hits the floor.

Your intuition has been confirmed, your building no longer produces positive cash flow and your completely upside down. As an investor you realize that selling is going to be very difficult unless you sell at fire sale price.

THIS REALITY IS HEART BREAKING

How do you avoid getting into this position?

Rental properties come down to monitoring 2 critical components:

INCOME & EXPENSES

Most people obsess about decreasing costs. While this is encouraged, they often forget about INCREASING INCOME!

As with any business, the income is the lifeblood of the business. This means that rents have to go up on a regular basis just to keep up!

When your in a slow market and vacancies are high. Rent increases are often the last thing your thinking about.

IF THAT SOUNDS LIKE YOU, YOU NEED A RESET!

If you think about it, these are the most important times to do your increases! During these challenging times, your probably giving out free rent and all sorts of incentives in order to fill up units as quickly as possible.

In order to preserve the value of the property and keep your head above water, you must implement regular rent increases to your existing tenant base.

The problem is that most owners have a hard time getting past the mindset required to do this. The thought is that if you increase the rent, your tenants will move. This is a position of weakness and should be avoided.

If you've done a good job in your leasing process, your tenants should be expecting rent increases. Always advise your new tenants that yearly rent increases are automatic. Send them a reminder a couple months before its due to make sure they did not forget and are ready for it.

When you properly communicate with your tenants, nobody is surprised when the time comes for the increase. They've known about it all year and are mentality and financially prepared.

If your increasing your rents every year, the increases will be tolerable by your tenants. A $10-$20 increase is easy to digest however a $50 or $100 can be rough.

Owning apartments is the best vehicle for wealth, never forget that your goals are to keep expenses in line as well as increase your income.