As the property manager, it becomes your responsibility to notify your tenants that their rent will be going up. However, the property owner can’t just order the rents increased at his whim, there are processes you must adhere to in order to legally raise the rents on the properties you manage. In other words, you must be able to justify an increase in rent before you can actually raise it.
How Do You Justify Increasing the Rent?
While no one can deny you have the right to set your own rents, how do know if your increase is justified? Here are three common acceptable reasons for you to consider.
Changes to the Neighborhood
Rents are always higher in the more desirable areas of any town. If there has been a significant improvement to the neighborhood in which your rentals are located, you can justify an increase in rent often a significant one. Some areas experience sudden major increases in rent when a new high-paying major employer decides to relocate their offices nearby.
Increases in the Cost of Living
Every year for the past few decades, the cost of living has continued to go up or the very most stay the same. However, it is safe to say the cost of living has experienced a steady increased an average of 2 percent. It is with this in mind that many property owners, landlords, and managers raise their rents anywhere from 1 to 3 percent each year. Raises like this average out to 2 percent annually ensuring their rents stay in balance with the cost of living.
Improvements to Your Properties
If you have made any major improvements to the property such as remodeling a kitchen or bathroom, adding air conditioning or replacing the old unit with a new more energy efficient model, you can raise the rent. This is considered to be a very good reason for increasing the rent on the property.
Bear in mind that improvements like this may also move your property up a level or two on the desirability meter. In doing so, this makes your property worth more in regard to monthly rent.
Letting Your Tenants in On the Bad News
Of course, if you plan to raise the rent, it falls on you to do the dirty work of letting your tenant know about the upcoming increase in his rent. It is very important that you go about doing so the right way or your tenant may be able to fight the increase.
You need to give your tenant as long a lead time as you possibly can. At the same time, you need to let him know why you are raising his rent. Sounds easy, doesn’t it? But what are you going to do when you have a tenant come to you and give notice because he just can’t afford the increase? You have a couple of choices.
You can simply let him move out and hope you find a new tenant who can afford the increased rent. However, this means going through the hassle and expense of finding a new tenant and hoping he will be as good as the last one.
Alternatively, why not work with your current tenant? Perhaps increase the rent on a sliding scale based on a new lease. This slow increase might make it easier for him to absorb the increase over time and leave you with a good tenant.