Landlording & Rental Properties

How to Successfully Raise Rents Without Risking Costly Vacancies

Expertise: Business Management, Landlording & Rental Properties, Real Estate News & Commentary, Real Estate Marketing, Personal Development, Real Estate Investing Basics
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One of the most often-pondered questions among rental property owners is whether or not they could be making more money on their rentals. Unfortunately for landlords, unlike many forms of investment that are sheer math games, renting has a distinctly "human" element to it that many money-focused investors aren't really prone to paying a lot of attention to. That's where a good property manager comes in. As the people who are interacting with the tenants on a day-to-day basis, we're the ones who can tell you whether or not a particular tenant seems likely to absorb a rent increase without bailing on you.

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Related: How to Respond if You Raise the Rent and Your Tenant Hands in Their 30 Day Notice

Here’s why.

We Have a Pretty Good Idea of Who is Happy and Who is Not

There are some pretty clear ways a property manager can tell if a tenant is happy with their situation:

  • If they call about a repair and they’re relaxed about it
  • If they turn in the rent on time consistently
  • If they’re putting some effort into keeping the place looking nice, mowing lawns and whatnot

The happier a tenant is in their current situation, the less likely they are to suddenly become unhappy if you raise rent by $10-$20/month.

We Keep a Close Eye on Comparable Rents

The easiest way to lose a tenant is to raise your rent to a level above what the nice house a block down the street wants. Even a happy tenant will probably be just as happy right over there, and they know it—so raising your rents beyond what the neighborhood is supporting will cost you. And while you might have done the research on comps when you purchased the house, we keep up on those prices on a weekly basis, so we can tell you when a rent raise is more likely to be harmful than helpful.

We Can Offer a Worst-Case Scenario

Moreover, because we're frequently advertising several dozen houses at once, we have a pretty solid idea of what the overall market is like in our area, which means we can offer a passable estimate about how long it will take you to fill a vacancy. If you raise rent and your current tenant moves, we're the ones who will know about how much it will cost you in repairs and rehabilitation, too. Together, that means we can give you an idea about what your finances would look like if the raise in rent goes badly wrong–which means you can determine whether or not you can absorb the risk.

Related: 4 Points to Consider Before Raising the Rent

We Can Show the Tenants the Deal They’re Getting

One of the reasons tenants are often upset about rent increases is that they feel like they’re getting ripped off somehow. Property managers already have the data for their neighborhood’s comparable rentals (see above), and we won’t hesitate to show them that they’re still getting a better deal than their neighbors.

But perhaps the most important reason a property manager is the right person to raise the rent is this:

tenant-screening

We (Usually) Have Goodwill to Cash In

Our entire function in life, as far as the tenant is concerned, is to keep their shelter safe, warm, and comfortable in exchange for a monthly payment. As long as we're doing our jobs well, we'll have a history of prompt, open communication, reliable repairs, and the occasional bit of mercy for a hiccup with a rent payment—and we can leverage that to convince a tenant that their extra payout is worth what they're getting.

Obviously, this won't work every time nor will it work if you try to raise rent like clockwork every time the lease and local laws allow you to (tenants catch on to stuff like that really quickly). But if…

  • You’re reasonable in what you’re asking,
  • You genuinely do keep your rents within the neighborhood’s norms, and
  • You have a property manager who can help you understand who is most likely to absorb a rent increase without causing trouble…

You can stop wondering whether you’re maximizing your income and start actually maximizing it.

[Editor’s Note: We are republishing this article to help out our newer readers.]

Do you regularly increase rent? How have your tenants reacted?

Let me know with a comment!

While in the mortgage business, Drew rose to a VP position at the first broker he worked for and then started his own company. In the pursuit of excellence, he obtained several mortgage designation...
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    Pao Prieto Real Estate Agent from Northridge, California
    Replied about 3 years ago
    Great article! I like the part when you always check on on keeping an eye on rental comparables on a weekly basis. What is your process or what application (website, etc) do you use when searching comparables? I currently use rentometer.com and pretty much get the median of rents in the area.
    Drew Sygit Property Manager from Birmingham, MI
    Replied about 3 years ago
    @PAO PRIETO : we also use Zillow’s “Rentzestimate” or whatever they call it. We do have the advantage of being a professional property management company, so we also have data on the properties we manage.
    Terry Pratt
    Replied about 3 years ago
    Don’t casually assume that tenants who pay rent on time consistently are happy – I pay rent on time like clockwork and am about as disgruntled as a (sub)tenant can be.
    Drew Sygit Property Manager from Birmingham, MI
    Replied about 3 years ago
    @TERRY PRATT: we agree with your point. Hope we didn’t imply otherwise, thanks for clarifying.