If you manage properties, you’ll eventually be faced with a dilemma: you need to increase rent, but you aren’t sure how to do it appropriately. You might simply want to increase rent to improve the profitability of your property or compensate for new features, but it’s more likely that you’ll increase rent out of necessity, due to rising costs.
How do you increase rent without scaring away your tenants?
The Tricky Problem of Increasing Rent
There are many perfectly fine and acceptable reasons to increase rent. Chief among them is a reaction to rising costs. If your property taxes, insurance costs, and maintenance costs are all going up, the only way to stay profitable is to increase rent in kind. If you explain this, and you only increase rent to the extent you have to, your tenants probably won’t mind, even if it imposes an additional financial burden on them.
However, if you increase rent in a way that is unexpected or unjustified, your tenants will have legitimate complaints. They may fight back against the rent increase, take retaliatory action against you, or simply leave, saddling you with a vacancy that can set your profitability back even further.
How to Increase Rent Without Scaring Away Your Tenants
So how exactly do you increase rent in your property without scaring away your tenants?
Although there are never any guarantees of success, these strategies can help you out:
- Know the law. Before you even think about increasing rent, be sure to consult local laws. In some areas, there are strict requirements for when and how rent can be increased. You need to know that you’re operating squarely within the bounds of the law before proceeding.
- Know the norms. You should also be familiar with the norms in the area. Do people generally expect their rent to increase every few years? Are other neighbors in the neighborhood also facing rent increases? Are property taxes and other expenses going up in this area?
- Pay attention to your neighborhood. Rent prices go up, generally. They go up even more in popular and successful areas. You’ll have a much easier time pitching an increase to rent if it’s in line with expectations for the neighborhood. For example, let’s say you have a rental property in a very popular suburb, and most rental properties in the area have faced rent increases over the past year. This landscape makes it very reasonable for you to also increase rent, especially compared to a neighborhood where rent prices have been relatively stable for the past decade.
- Have concrete reasons for increasing rent. Although you can legally increase rent for any reason, assuming you’re in compliance with the law, it’s a good idea to have concrete, objective reasons for increasing rent. Most tenants aren’t happy with the belief that their landlord is only increasing rent so they can pocket more money. If you’re increasing your rent because of higher expenses, articulate that.
- Communicate early. Communication is vitally important to make sure your rent increase is accepted and respected. The sooner you communicate your forecast of increasing rent, the better. This gives tenants more time to navigate this new financial burden and figure out what they want to do next.
- Answer questions transparently. Your tenant may have questions about how, when, and why you’re increasing their rent. To whatever extent you’re able, answer their questions transparently. Your tenants are likely going to be more satisfied if they have clear, concise answers, and it’s an opportunity to build mutual trust and respect.
- Keep increases small and iterative when possible. It’s not always possible to keep rents low, especially if you’re facing mounting expenses and other difficulties. However, when you have some degree of control, it’s a good idea to keep your rent increases small and iterative. Instead of increasing rent by $300 a month, consider increasing it by $100 a month the first year you roll out increases, with subsequent increases as the law allows. It shows that you’re trying to keep rent as low as possible while still allowing you to recoup some expenses.
- Consider adding new benefits. Most tenants will be happier paying additional rent if they get additional benefits because of it. Are there any special bonuses or new amenities you can offer in exchange for the increase?
- Actively listen to concerns. Active listening is a great skill for landlords to develop. It shows your willingness to hear and understand your tenants, and is a great way to understand their perspectives. Even if you can’t rescind the rent increase, you can at least let your tenants feel heard.
Applying these strategies can help you increase rent for your rental properties without necessarily scaring or upsetting your tenants. If you’re responsible, respectful, and transparent in your decision making, you’ll be far less likely to deal with catastrophic outcomes stemming from rent increases.