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Raising rents is a sensitive issue, and in fact might be one of the most difficult challenges a property owner faces with investment property ownership. Foremost, because we generally understand that no tenant likes the idea of having to pay more rent for a unit tomorrow they have been living in for less rent yesterday.
For a few property owners (generally the small property owners) the issue is closeness. They become so friendly with the tenants that the idea of having to increase the rent on nice tenants becomes agonizing.
For others (probably the majority) it is not so personal. It is the fear that raising rents might cause the tenants to move out and in turn generate unwanted vacancies. A fear that is justified, and safe to say, undoubtedly haunts every landlord, whether or not it is the primary concern. In other words, no property owner, tenant friendships aside, wants to be left with an empty building.
Raising rents, however, is a reality of real estate investing, and when a rent increase is in order, it is needful. The investor’s cash-on-cash return and ultimate value of the building depend on the amount of rents collected. Raising rents, therefore, comes with the territory, as do vacancies, as do emotional struggles and fears-welcome to the world of real estate investment. If you are currently struggling with the issue of having to raise rents, here are a couple of ideas you might consider implementing. They have worked for others so they are worth your attention.
1. Know what your competition is doing. Tenants are less likely to object to a nominal rent increase when it is in line with the rental market rate in your area. They typically are not willing to suffer the stress and cost of relocating when it means paying the same rent down the street.
2. Be consistent with your rent increases. Whether you raise rents annually or semi-annually, regular modest increases are more easily understood and taken in stride than irregular massive increases. Working people normally understand cost of living adjustments. Just be sure to raise rents about the same time during the year because consistency tends to reduce friction generally caused by the element of surprise.
3. Consider doing something extra for the tenants. You might want to offset the sting out of an impending rent increase by steam cleaning the carpets, washing the outside windows, or making some other upgrade to the unit that might be in order anyway.
4. Post the rent amount on your “For Rent” signs. When existing tenants see what a new tenant will have to pay for the same unit they currently rent for less (assuming they are paying less, even after the increase), they are less apt to object and might even go to bed that night appreciative about the good deal they are getting.
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