When you increase the rent, it increases the value of your property and your monthly income. Besides, a rent increase is a good way to cope with the inflation and increased expenses. However, you cannot increase the rent whenever and however much you want. You’ll have to consider the following things when increasing the rent.
4 Things to Consider While Increasing the Rent
1. Market Standard
Firstly, you’ll have to consider the market standard rent in your neighborhood. If all homeowners in your neighborhood are getting more than what you charge, you should increase the rent. To understand the market standard, you’ll have to talk with tenants and property owners in your neighborhood. Besides, you can check rental reports to understand the rental trends.
2. Local Laws about Rent Increase
While increasing the rent, you’ll have to respect the local rental laws. In most states, you can increase the rent by up to 10%. Again, before increasing the rent, you’ll have to send a rental notice to the tenant. Generally, this notice period is between 30 to 90 days.
It’s crucial how you inform the tenant about the rental increase. Depending on the state, you can use e-mail, letter, or meet personally and notify the tenant of the rental increase.
3. Investment Goal
If you’re a full-time real estate investor, increasing the rent is rational for you. Even if the tenants leave your property, you can manage the hassle of finding another. But if you’re busy with other ventures apart from real estate investing, increasing the rent may not be a good decision for you. Because in some cases, when you increase the rent, the current tenant wants to leave the house. And this means you’ll have to find another tenant, which comes with a lot of work. Moreover, if you’re paying the mortgage with the rental income, the vacant property will create a financial burden on you.
4. Your Relationship with the Tenant
A friendly or cooperating tenant is a blessing. If you have a decent relationship with your tenant, they will understand your situation and agree on paying more as rent. If they have any financial issues, they will inform you about it, and you can start the process of finding a new tenant.
On the flip side, if there is an issue between you and the tenant, they may not agree to pay the increased rent. Here, you’ll have no option than to tell the tenant to leave the premises.
When Should I Increase the Rent?
· Start of the Year
You can increase your rent every year to fight inflation and increased expenses. However, don’t increase the rent willy-nilly. Increase in small increments. Otherwise, your property maybe vacant soon.
· End of Each Lease Term
The best way to increase the rent is after each lease term. However, before increasing the rent, you should notify the tenant at least 2 months prior. This way, the tenant can make a decision whether they want to renew the lease or look for a new house to stay.
