Should I Increase Rental Rates Every Year?
I am aware of a house owner who does not charge much as rentals, never increases their rental rates, and is pleased with everything.
While a number of his tenants hardly changes, he rarely makes any profit from the rental properties too.
The renter moved out of the property to the surprise of the management company. The rental is left vacant.
Therefore, it is important to ensure a balance between the need to make a profit on the property and sending away great tenants.
This post will give you an insight into this.
Why Rent Increases Are Important
To ensure the maintenance of a property, it is important to increase the rent whenever the cost of owning a property increases.
These necessary expenses:
With a few important but controllable expenses which include property maintenance fees like pest control and lawn care, repairs like plumbing problems and replacement of appliance, and vacancies, then you have a lot to deal with.
As a local or foreign landlord, your failure to increase the rent will lead to a deep cut in your profit.
If you feel uneasy about increasing your rent, consider calculating if the current rent will be enough to take care of your income.
Your Expenses Do not Determine Rent
Although you can consider higher costs as a reason to increase rent, the amount of rent is majorly determined by the market.
You may have difficulty getting tenants if you are considering charging more than other comparable properties in the same location.
Therefore, you may need to reconsider whether keeping such property is worthwhile or not.
Making money is allowed
As a property owner, you have the privilege to increase the rent whether there is a rise in the expenses or not.
The basic reason for investing in a property is to make money;
hence, it is good to increase rent.
If you currently charge lower rents than other comparable properties in your neighbourhood, do not hesitate to increase the rents.
How much is reasonable to add to a rent?
Do not forget the example given earlier about someone who left a property due to a large increase in rent.
Avoid being that kind of a house owner.
In the example, $200 means an increase of 16.67% in the rent.
Generally, most people are comfortable with an increase of about 3% to 5% in rent.
For example, given, the increase at 3-5% would have been about $36 to $60, and this would probably have been affordable for her and most other renters.
When is Not Possible to Increase The Rent
If you own a rent-controlled property, or if there is a limit to rent in your jurisdiction, then you cannot go against such a limit.
This limit may make it impossible to increase the rent at all or as much as you want.
Furthermore, if you have a fixed lease term on a property, the rental rates cannot be increased.
For instance, if you lease a property out for two years, it is not possible for you to increase the year after the renter has stayed in the property for a year.
You can only raise the rental rates after the agreed two years.
For monthly tenancy, proper notice must be provided about 30 days before the rent is raised.
If you are struggling with tenancy agreements – Reneza is always ready to help you!
We will prepare them, and you will need only to sign. Let it out – without stressing out!
If you find it hard to increase the rent
Perhaps you are a type of house owner that cannot afford to increase rent.
It is okay if the arrangement is comfortable for you.
Nevertheless, you should increase the rent when the renter moves out.
When all is said and done, knowing the comparable rents in your neighbourhood can help you decide how much you want to charge for your property with confidence.
Are you still in need of any help for your property?
If yes, Reneza is the one-stop, industry-leading team that revolutionises real estate and offers excellent services.