Things to consider when adjusting rent prices
To increase rental rates or not to increase rental rates…that is the question! A long-standing question that should warrant a good amount of consideration before answering.
If you find yourself questioning whether to increase rental rates once a tenant’s lease is up for renewal, you should really take a minute to think about finding the right balance between making money on a rental and keeping good tenants.
Research before you increase the rent
Just because you want to increase the rent doesn’t always make it the best choice in the long run. Your rental rate is based on the home price, market rate, and demand in the area. When investigating potential rent increases, take into account the following questions.
- What makes my property more attractive to potential renters? (Upgrades, storage space/garage, amenities, location, quality school system)
- What are the rental rates in my area? What is a realistic market price for my rental property?
- What is the demand for a rental property in my area?
Use your competition as a baseline to gauge how much you can charge for rent when it comes to your property and what would be a fair rent increase.
Reasons you might increase the rent
Raising the rent is necessary to maintain the bottom line. Expenses such as:
- Property taxes
- HOA Fees
- Cost of Living Increase
Run the numbers and determine what you need to maintain a positive cash flow for the rental property. Understand that if you choose to increase your rental rate, it is best practice to do so when your tenant is renewing a lease. Don’t forget to provide them with a written notice 60 days before their lease is to expire if you choose to increase the rent.
How much should you increase?
A yearly increase that most people can handle is in the range of 3-5 percent. Roughly $30-$60 a month. If you increase your rent too much, it may force your tenant to go elsewhere, and now you are dealing with a vacant rental property. It is always easier for a renter to accept and handle a slight rent increase each year than a significant increase in rent at one time.
An excellent tenant is worth more than a rent increase
A gentle reminder that an amazing tenant that pays the rent on time and doesn’t rock the boat is worth more than the monetary increase in rent. When deciding on whether to increase the rent, look at the situation holistically. Try not to make the decision based solely on the numbers because a tenant change can sometimes cost you more in the long run.
Need help? Check-in with a Property Management Company
At Oak City Properties, we have been taking care of 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: https://oakcityproperties.com
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