Inflation increase/rent increase

4 Replies

I'm new at RE investing and I own a few investment properties that are being rented out. We have a property management company that deals with everything, so my question is... When inflation goes up, rent goes up (not sure all the time?) so with dealing with property management, as a landlord, are we allowed to up the rent? How does that work with the property management? I have not contacted my property management about this yet. Just wanting to get advise. Thanks in advance.

good question.. I like to raise rents when a property turns over or I renew a lease and the market justifies it.. I look more at what comparable units in my area are going for to determine if I need to raise rents..you are right that your costs (insurance, materials, labor, etc) do often go up over time, but I don't try to explain the concept of inflation or the consumer price index to tenants. I have heard of people raising rents a set percentage annually (3 or 5 percent eg) but I prefer to look at the actual market (because your tenants will also be looking at comparable units, so you want to be competitive)....and just being in rentals over a decade, I can say the small market increases add up over time....also, I self manage but I suspect you could discuss market rents with your manager and possible increases.

I think it is prudent to raise rents as you get turnover and market rents increase. Your PM company should be able to give you guidance as to market rents. If you fail to timely raise rents, you will find you are under market and it is more difficult to raise them fast enough to compensate for market changes. I made this mistake two years ago when dealing with health issues. I had to raise one tenant $190 a month. That wasn't an easy adjustment for either of us:) Fortunately, they are on a month to month so I didn't have to wait until a lease expired. I now raise rents with every turnover and our market justifies the increase. More than likely, yours might as well. Increased taxes, insurance, operating expenses, as well as market fluctuations etc are valid reasons to increase them.

@Rhea Jackson , what Michael and John said ie. not specifically linked to statistical inflation figures. It's about what the market will bear in your exact area, and your tolerance for longer vacancy times if you try to raise the amount higher than justified by local comps. Cheers...

Determining optimal rent is more a function of market rates rather than inflation. For the properties I manage, I run comps a couple of months from the end of the lease term, and then discuss with the manager whether or not we should increase the rent.