If you’re a landlord (or a homeowner, for that matter), you know that real estate expenses increase over the course of time, from rising insurance premiums to tax assessments to repairs to adjustable mortgage rates. So, landlords need to raise the rent periodically on lease agreement contracts, to keep pace with rising expenses, but it can be a touchy and difficult conversation with the tenants. There are some things you can do, as a landlord, to increase your chances of success with raising the rent, so consider some of these ideas to keep you in a performing lease agreement.
Idea 1: Timing is Everything
Property managers are familiar with seasonal fluctuations in the lease industry; it’s much harder to fill a vacant lease property in the fall and winter than it is in the spring and summer. Wait until spring to discuss a rent hike with your tenants, so that you can find new tenants if need be.
Idea 2: Sufficient Notice
Most states have an advance written notice requirement for rent increases in a lease agreement, so it’s a good idea to check up on your state’s laws if you’re unsure. Further, you may even be able to find new tenants for your rental property while your current tenants are still living in it, leaving you with a smooth transition with no vacancies.
Idea 3: Discuss the Rent Increase in Person
You may be reluctant to have this uncomfortable conversation in person, but there are several sound reasons for you to do so. First, you’ll make a better and more personable impression, especially as you explain why you need to raise the rent on the lease agreement (rising real estate taxes and insurance premiums, etc.). Second, people are far less likely to say “”no”” or cause a confrontation while face-to-face, meaning you’ll have a far better success rate when having this conversation in person.
Idea 4: Offer a Longer-Term Lease Agreement
No tenant wants to worry that the rent will keep going up every year like clockwork, which can quickly price them out of the lease. To reassure them that it will be at least two years before you have this conversation again, offer them a two year lease agreement that locks the rent in at a certain price. It’s a great way to lock in a longer term, to keep your good tenants around longer.
Idea 5: Research Market Rents
Before raising the rent arbitrarily, do some research on what other comparable houses rent for on your block and street. It can be especially helpful to walk through some other houses available for rent in the neighborhood, to see how your rental property compares to the competition. Then, when you go to raise the rent, you can offer concrete market data to your tenants showing what the market rents are, compared to what you’re asking of them in the new lease agreement.
Idea 6: Consider Alternative Scenarios
The amount of rent coming in should not be considered as the only factor when making a decision about raising the rent. You may have a clean, responsible, and reliable tenant who can’t afford to pay you more than they already do, in which case it may be worthwhile to keep them even with your higher expenses. Yet another reason to have the conversation about rent increases in person is to better gauge their reaction; some tenants may not have a problem with the higher rent, while others may be upset and unable to pay it. If you think the higher rent might drive a good tenant away, consider offering them an alternative scenario. You might be able to offer to keep their rent the same, if they sign a long term lease agreement, or you can slowly phase in the higher rent payments over the course of a few months or even a few years. Regardless, be sure to let them know that the only reason you’re considering working with them on the issue is that they’ve been such great tenants, who have paid on time and treated your rental property with respect.
Sure, sitting down with your tenants to ask for more rent is not fun, but it is a part of being a landlord. Be honest with your tenants, be fair, consider each lease agreement on a case by case basis, and remember that a long term lease agreement may be more valuable than a few extra dollars each month.