Landlording & Rental Properties

6 Tips for Raising the Rent Painlessly (Without Losing a Single Tenant!)

Expertise: Landlording & Rental Properties, Real Estate News & Commentary, Personal Finance, Real Estate Investing Basics
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Like most pieces of the property management puzzle, raising rent is part art, part science.

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There’s a human element to it—that’s where the “art” comes into play. Fortunately, even that can be systematized.

Far too many landlords hesitate and fear raising the rent. But it's a part of the business, as raising prices is a part of any business. Inflation waters down the value of your rents each year, all while expenses ranging from taxes to insurance to repairs continue to rise and cost landlords more money.

Here are six (and a half) tricks to avoid falling behind other rents in the neighborhood—and earn your best possible returns on your rentals.

READ MORE: How to Raise Your Tenants’ Rent—Plus, Free Sample Rent Increase Notices

6 Tips for Raising Rent Painlessly (Without Losing a Single Tenant!)

1. Raise the rent incrementally every year.

If there’s no other piece of advice you follow in this article, follow this one.

Where so many landlords run afoul of rent hikes is that they wait. They let the rent fall far behind market level, and then try to raise the rent to normal market pricing all at once. But by that point, it's such a large leap that it jars the renter's budget, and they end up either leaving or resenting the landlord thereafter.

Instead, raise the rent by 2-4% every single year like clockwork. It will keep the rent competitive at market levels, and it’s a manageable increase for your renters.

Perhaps most important of all, it sets expectations among your renters. They’ll come to accept annual rent hikes as a fact of life, like paying taxes or politician sex scandals.

Bonus "half tip": Schedule your lease terms to end in April or May, regardless of when the renters first move in. When the day finally comes when your renters non-renew and move out, it will be much easier to find replacement renters in late spring/early summer than other times of year!

rental-property-pros

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2.  Never raise the rent by more than 8%.

Raising the rent by 2-4% won’t scare off your renters. At 5-7%, they may start considering whether to move. Above an 8% rent hike, many tenants will move on principle, if not because you’ve busted their budget.

Again, don’t put yourself in a position where you’re $200 below market rents! It’s not fair to you, and it’s not fair to your renters when you raise the rent by so much at once.

Raise the rent incrementally every year to avoid this position.

3. Consider offering another option besides raising rent.

If you do raise the rent significantly, consider offering your renters an alternative to avoid the hefty hike: locking in a longer lease.

Imagine the following scenario: The rent is $1,500, and you’re raising it to $1,590. Your tenants aren’t happy.

But you offer a way out, you'll lock in the rent at $1,550 for them if they sign a two- (or three!) year lease renewal.

Why would you make such a sacrifice? Because turnovers are where landlords lose the most money and the most time in labor and headaches. The longer you can keep each tenant, the lower your turnover rate and the higher your average returns.

4. Remember that better relations with your renters = higher renewal rates.

Maintaining warm relationships with your renters is easier than you think.

First, follow the best practices we outlined in this article about boosting your renter retention rate.

Here’s a quick and easy one: Whenever you call your renters about anything, spend 60 seconds warming them up first by asking about their personal lives. Keep a brief file on each tenant—their children’s names and ages, their interests, their jobs, and what was going on in their lives the last time you talked to them.

These files take only 30 seconds to keep updated each time you speak with your renters. It takes attention, not hard work.

Example: “Hi Betty, how are you doing? The last time we talked, little Bobbie was in the playoffs in his little league. How’d he and the team end up doing?” or “I know you’d been worried about that merger at work. How’d that go?”

You get the idea.

It’s amazing how big of an impression these small gestures make on your renters. They shift the context from an adversarial “money-grubbing landlord” relationship to a collaborative human relationship.

When you deliver the bad news that the rent is going up, they’ll take it much better knowing it comes from someone who bothers to ask about their lives and their children, rather than a faceless, soulless check-casher.

5. Implement dual communication: phone and written notice.

By law, you must send written notice of rent increases. It must also be delivered within a certain timetable, usually 30, 60, or 90 days before the lease expires.

But that shouldn’t be the only form of notice that you’re raising the rent. No one likes receiving bad news by letter; it’s impersonal and bureaucratic.

Call your renters to deliver the news the same day you mail the written notice. Be friendly, professional, and polite but firm.

After investing a minute or two in the small talk we discussed earlier, present the news like this: “Betty, I wanted to reach out and give you the courtesy of a phone call before sending off the renewal form. This year, the rent is going up by $40. You’ve obviously been a great tenant, and we’d love to have you stay on. You should be receiving the renewal form over the next few days, and we’ll email you an electronic version as well since that’s easier for most people to check off, e-sign, and reply back with.”

If they push back against raising rents, just respond with, "I understand, Betty. But rents go up alongside our expenses; it's just a part of life. We'd love for you stick around, and we may be willing to negotiate a lower rent increase if you're willing to sign a longer-term lease. But if you decide to move on, we understand, and we'll work together for a smooth move-out process."

See? Nothing to be afraid of.

tenant-screening-tips

6. Poll about property upgrades—and sometimes make them.

Want your tenants to keep renewing year after year?

Another way to build trust and human connection—and to improve the value of your property—is to ask them what upgrades they’d like to see. Then, implement them sometimes (but not always).

Once or twice a year, when you talk to your renters, tell them, “Hey, Betty. I wanted to check in and see what kind of changes you’d love to see around the property. I can’t promise anything, but we value you as a renter and want to do what we can to keep you with us for the long haul.”

The ideas and suggestions you get will run the gamut, of course. Some will be outlandish, while others will be great ideas. Look for ideas that are affordable to implement but that will improve the value and marketability of the property long-term.

In other words, look for improvements that will justify raising rents for future tenancies, not just help you keep this one renter happy.

For example, many smart home upgrades are inexpensive to implement but fun and exciting for tenants, and in some markets, they justify significantly higher rents.

No one likes hearing that their bills are going up, but renters won’t think twice about it if they can see tangible improvements around the property—especially improvements based on their own ideas!

Be a Friendly-But-Firm Professional

In all your communications with tenants, be professional, friendly, and firm.

Never argue. You do not negotiate with terrorists.

Build a human relationship with your tenants. Set expectations by raising the rent every year. It’s not just taxes and death that are inevitable, but also that your rents will rise every year!

But not by much. You’re not looking to bust your renter’s budget. You’re simply keeping pace with market rents in your neighborhood (and your ever-rising expenses).

If raising rent is uncomfortable for you at first, write out a script similar to the examples outlined above.

You are not your tenants’ adversary. You are a service provider, they are a customer, and you want to work with them in a friendly and professional way, while still enforcing the rules and defending your boundaries.

What have your experiences been in raising rents?

Share your stories!

G. Brian Davis is a landlord, personal finance expert, and financial independence/retire early (FIRE) enthusiast whose mission is to help everyday people create enough rental income to cover their ...
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    Kimberlee. Kathrein,
    Replied over 1 year ago
    We have owned a small cottage complex with 7 1 bedroom unit and one 3 bedroom house w small basement apt for about 14 yrs are oldest tenant has been faithful but now we learn he has ran several prospective tenants repair workers even a realtor and property management company been renting out the bottom apt telling us he was having issues with every tenant there , we value him gave him discount because he was going to use it for personal use only long story short hes neglected the house and there are serious issues he is now refusing to honor his agreement and has stopped paying his normal amount to fix the basement apt and i fear even further damage and a long exit . Any thoughts . more to the story even a bit more scanalist but this is where we are at ?
    Eric Ramsay Real Estate Agent from Aberdeen, MD (21001)
    Replied 7 months ago
    I've heard conflicting opinions on whether to raise rents on a good tenant. This article suggests 2-4% incremental annually as a standard so tenant expect them. Presumably you already have decent cash flow on your rental prior to any hikes. I've heard the savings from not having to pay turnover costs can outweigh the benefits of incrementally raising rents... which is why the hikes happen after a number of years of flat rates. Would it not be better to hold firm (i.e. flat rate) for a good tenant and only readjust to market rate when turnover happens naturally?
    Alpha Journal from Connecticut
    Replied 7 months ago
    Great article Brian. That was a really good read.
    Lisa W. Investor from Portland, Oregon
    Replied 3 months ago
    @Eric Ramsay.... The risk of not raising the rent even for a great tenant is that if they end up staying a long time you could be woefully under market. I rented my first rental to a 25 year old guy and his buddy. Figured they'd stay a few years and then move. The buddy did, but the first guy ended up staying 17 years! And he was a good tenant. If I'd never raised the rent I'd have been losing money all these years.