Best Way to Negotiate Rent Increases
While tenant turnover can lose money, not increasing the rent can also be a financial drain. Landlords need to understand how to tactfully and effectively raise the rent…without losing the tenant. To help, our experts at Oak City Properties put together a list of considerations when raising the rent and how to properly navigate the process.
Know the Market
The first step in a rent increase is to know the market. While there is no standardized mathematical formula to determine a rent increase, it is crucial to know the market value of your property and the market rental rate. Do your homework by researching the comps in the area. If you need some help determining the rental rate for your property, take a look at
Know the Law
Depending on the laws in your state, a landlord may raise the rent before renewing a lease. Typically, a lease sets a fixed price of rent for a given period of time (six months to a year). The price will not change during that time even if there is a change in property ownership.
For tenants under the Housing Choice Voucher Program or Section 8, a rent increase is only possible once a year. Each year HUD sets a fair market rent standard which determines if the rent can increase. Always check the local laws before raising rent for anyone who is a Housing Choice Voucher.
Know Your Tenant
Before proposing a rent increase, it is essential to consider your tenant. Let’s say your rent is $1,000 a month. If you propose an increase of 5%, you’re asking the tenant to increase their rent by $50 a month for a total of $600 a year. Most individuals can’t afford a rent increase that encompasses hundreds of dollars. Instead, consider gradually increasing the rent over the span of two years. This will be easier for the tenant to financially manage and a much less emotional experience.
Know the Rule of Thumb
Never raise the rent by more than 10% at one time! If you do…be willing to find a new tenant! Take a look at our blog on increasing rental rates.
Know the Common Practice
Many lease agreements include a specific notice period if there will be changes to the rent. As a landlord, it is common practice to send a written rent increase notice before that specified date. The period is usually 30-60 days before the end of the current lease agreement. However, tenants need ample time to decide, so it may be wise to give them 90-120 days of advance notice when there is a rent increase.
Know the Options
Think you might need some help navigating the rental collection process? Check-in with a Property Management Company. At Oak City Properties, we have been caring for rental properties for years!
Our full-service property management company will help you find and buy new rental properties to grow and diversify your portfolio. We will also market the property, locate prospective tenants, and show the home to qualified applicants. Once a tenant is placed in your rental property, we will: collect rent payments, assess and collect late payment fees, provide 24/7 maintenance, help with accounting/tax services, and deal with any court appearances in the event of an eviction.
If you are interested in learning more, give us a call at (919) 232-9222 or check out our website: www.oakcityproperties.com
Want to read more about property management services? Here are a few blogs that may interest you:
- What to Expect from a Property Management Company?
- 7 Benefits of Using a Property Management Service
- 4 Tips for Collecting Rent
*Follow us on social media to learn more: