Last time, we discussed the changes that come with being a landlord, namely what you should expect, should you decide if you want to raise the rent(s). There are many reasons that might prompt a rent increase, a search of real estate comps may support it, however, I want to use these reasons below to assist you with your decision:
- It is important to learn when enough is enough regarding everyone. Take time to think about is there a valid reason for the rental rate increase? If you can’t give one, don’t be greedy. Lining your pockets is not a reason to potentially lose a solid tenant.
- Be sure to know your market. We are talking basic supply and demand. The market could be full of rentals and then tenants could jump from property to property. If supply is scarce, than the opposite is true and you might not suffer any turnover. It is a chance you take in the rental investment property business.
- Your rental should surpass or at the very least match surrounding properties. How does your rental property’s location, condition and amenities measure up to other rentals in and around the area? Tenants are less willing to endure the stress and cost of relocating over a small rent increase when your property is one of the nicest in the neighborhood.
- Make sure that you are wise with the increase. Modest increases given over regular intervals are more easily understood than irregular ones that surprise and undoubtedly will alienate your tenants.
My general thinking is, there will always be some risk when proposing rent increases because tenant expectations vary, circumstances vary, market conditions vary, and certainly personalities vary. Regardless, when the investor does his or her homework and then proposes an increase that has reasonable grounds, chances are good that it will be received with realistic agreement.