It’s that time of year again when your tenant’s tenure is almost up, and you’re weighing your options. They’ve been fantastic, and you want them to stay. At the same time, lease rates everywhere else are hiked up. Should you increase their rent as well? If yes, by what factor? There is favorable mid-point between ensuring that your tenants are well tended to for the long-term retention of the good ones while realizing a profit in your business.
Prior to raising the rent, introspect with these few questions:
How does rental revenue look on your mortgage? If you’re servicing a mortgage on your property, there must be a percentage of the rent that goes towards it. Hence, you need to know whether it’s time to raise the rent by calculating your rent-mortgage ratio. This involves analyzing the specifics of your mortgage as well as revising your ROI projections.
Do you need to raise the rent? You need to find a resolution between what will generate profit for your business and persuading your upright occupants to remain. One way around this is gleaning what rates the landlords in your vicinity are charging. If what you intend to charge exceeds the value of similar properties, then the tenant may opt to move on. This may put you at the risk of the turn around a lengthy period of in occupancy.
What are the legal concerns about raising rent?
What are the rights of your tenant? When it comes to rent increments, tenants have certain privileges. It is best to become acquainted with the local laws so that you handle any circumstances properly.
Is your property rent-stabilized? This characteristic depends on the location of your property. The article above explains the conditions for raising rent.
Does your property feature senior citizen rent increase exemption? Some local laws cover rent increments on the elderly. Due to this discrepancy, it’s best to know the legalities of increasing the rent of senior citizen tenants in your area.
What are the legal stipulations about Section 8 increases? If you’ve decided to provide housing solutions for Section 8 occupants, then expect some limitations. There are merits and demerits of choosing section 8 tenants, and once again, you must consider the legal implications of raising the tenement rate on this cohort.
Now you’ve decided to raise the rent, what’ next?
Timing is essential: There are various reasons why you may raise the rent on your property. One such idea is keeping in tune with rising prices. Find the most appropriate time to break it to your tenants about the change in clear terms.
Writing a rent increase memo: You’ll need to notify your tenant of your decision to raise the rent in a written letter. This must be done before you offer them an option to renew their rent so that they have ample time to weigh their options.
Negotiating rent increase: Your decision to increase the rent may be met with rebuttals from your tenant. They may wish to open negotiations. And that’s why you must anticipate the angles they may be coming from and whether you’ll conform to them or not.
Cushioning the effects of the increase: If your tenant is great and you don’t want them to leave over hiked rent, offer them some benefits if they opt to renew their contract. By doing this, you’re showing them that you care, incentivizing them to stay and that your decision to increase the rent was influenced by surges in the local market.
Add-on options: In addition to enticing your tenant to stay on, you may liaise with local businesses to know if they keen on collaborating with you. You can offer yearlong rebates, rather than a one-off gift.