About MeBrentnie Daggett
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With cost of living at a steady incline, and with recent years providing a positive position for rental property owners who are experiencing rising rental rates across the nation, increasing the monthly rent is something every landlord will likely experience.
You may decide to increase your rent to match market rates, to pay for property improvements, to accommodate tax increases, or simply to increase your profit margin. The trick to raising rents properly, however, is doing so in a way that limits turnover and keeps vacancy rates low.
In most cases, state regulations dictate when a landlord is able to legally raise rent prices, and how and when the tenants must be notified of the increase. Large municipal areas can have special rental laws, so always check not only with your state but your city and county regulations as well to ensure that you adhere to the law when raising your rent.
Regardless of your state, landlords are not allowed to increase rent in the middle of a lease term. (The only exception to this rule is the rare occasion that the lease agreement specifically states when and how much the rent will increase during the tenancy.) Rent can increase, however, in-between lease terms and under a month-to-month rental agreement, provided the proper notice is given.
As with delivering any bad news to tenants, be certain you go beyond just following the proper legal protocols, and deliver the news with professionalism and great customer service. This will serve to assist with retention in spite of the increase.
The most important aspect to informing tenants is ensuring you are following your state's requirements. Most states require official notices of rent increases to be provided in writing. These must include information about how much the new rental rate will be and when it will take effect. Many states have stipulations that layout the amount of notice based on how much the rent will increase; for instance, in most states your tenant must receive a written notice 30 days prior to an increase of a maximum 10 percent the rent in the past 12 months. If you increase by more than 10 percent, depending on the state, you could be required to give 60 days or more written notice.
In most cases, a landlord has the legal right to ask whatever price they chose for a rental property.
Outside of state-specific regulations, finding the proper rental payment charge is a balance between wanting the highest possible income generated from your investment and maintaining a price point that is competitive and will attract the best possible tenants. Several factors can affect the amount of rent acceptable to charge tenants living on your property.
Having knowledge of your local market is key, in a competitive rental market, most tenants have the ability to chose from a few different available properties and this means that a setting an appropriate rent amount will ensure the unit keeps qualified and responsible tenants.
Beyond the required notices and restrictions regarding when a landlord is able to raise the rent, most states have specific protections for tenants that prevent landlords from issuing a rent increase that is discriminatory or serves as retaliation. For example, federal law dictates that a landlord may not raise the rent on tenants of a certain race or familial status. Furthermore, most states have provisions that prohibit a landlord from increasing rent in a retaliatory manner due to a negative experience with the renter (such as a renter reporting a habitability issue.)
Prudent landlords will find that small incremental increases to rent serve their investments and their tenants well. By increasing rent by a small percentage each year, you will stay on top of market trends, keep your margins high as cost of living increases, and lessen the burden on your tenants.
You may feel comfortable with your rent prices now, but find that 5 years from now they are remarkably below market-rate. However, a large increase after 5 years of the same rental rates can scare away your tenants. It can be much easier for tenants to stomach a $20 increase every year, than a $100 increase every five. This incremental increase can assist your tenants from being blindsided, and can even earn you additional income from your property than a large increase would in bursts.
In the end, knowing your state’s laws regarding rental increases is key, and being willing to increase your rent in small doses can protect your margins and reduce vacancies.