As operational costs, property taxes and inflation go up, raising rent is inevitable. Failure to match the going rental rates of your surrounding area, and to adequately cover all expenses, will only serve to hurt your bottom line And if you delay on this change, you’ll be facing an even larger rental gap to cover in the future, which will endanger your ability to retain renters through the transition.
Of course, there are right and wrong ways to go about increasing rent rates. You still want to keep an eye on resident retention while implementing a rental rate increase, especially when you’re dealing with good renters. Any increase is almost guaranteed to trigger conversations with current residents about why their living costs are going up, and how you handle these interactions will affect the smoothness of the transition. Here are a few tips to help you minimize turbulence and raise rent without burning your current residents and damaging your reputation.
Be Transparent About the Change
Unless the rent increase is solely aimed at fattening your bottom-line, your property likely has valid reasons for upping rental rates. There’s no need to be vague or cryptic: Instead, rental property experts Judy Tremore and Deborah Boersma Zondervan recommend that landlords and management be honest about why the change is occurring. You might be trying to keep up with the going rates of the surrounding area, or you might be facing increases in operational costs — maintenance, groundwork, utilities or otherwise — that need to be covered. Emphasize that you don’t want to increase the living costs of your residents, but that the property’s current economic situation has made an increase unavoidable.
Inform Renters Early
In most cases, state landlord-renter laws require at least 30 day’s notice before increasing rent. Keep in mind, too, that you can only increase rent at the end of a lease period, unless existing lease agreements contain a clause allowing for rent increases in certain circumstances. While 30 days in the minimum amount of notification, the earlier you can advise residents, the better. That will give them more time to discuss the matter with you and/or review their options without feeling rushed to make a decision. In fact, some residents might move out on principal if they feel that you have tried to mislead them or pressure them into re-signing.
Offer Flexibility to Good Renters
No rental property wants to lose trustworthy residents with a strong track record. Some residents will approach you to explain that they can’t afford the proposed rent increase. If you highly value their business, don’t be afraid to negotiate a smaller increase for those individuals. A good resident is an asset worth retaining, even if it cuts slightly into your rental income.
Most residents value property management that understands the perspectives of its renters. It isn’t hard to unveil rent increases in a way that considers their effects on residents, and those individuals and families will respond much better to management that shows a “human” side. This more sensitive approach will help your property retain residents — particularly the good ones — while protecting public opinion regarding your property. In an age where the Internet has amplified the power of word-of-mouth advertising, every impression counts.
How do you handle rent increases with your residents?