Updated about 5 years ago on . Most recent reply
Rent Increase Guidelines Requested
Ever since becoming a landlord, I have struggled with the concept of rent increases. The short story is I haven't done them. The longer story is that is coming back and biting me in the backside now. Expenses have gone up considerably in the last couple of years and my rents aren't keeping pace. I need to turn this around.
My main question now is getting some guidelines on the amounts other people raise them by and how often? Most of my tenants sign 1-year leases. Is there typically a formula or percentage increase that most people do? Should I do it each time the lease renews?
I had a fellow REIA member say she puts the increase schedule in her initial lease so tenants know from day one how much they will be going up and when. I am afraid that encourages people to start pre-planning to leave if they know they are coming up to the end of a lease and don't want to get hit with an already known rent increase.
Last question, how do most of you present this increase to tenants? Do you say because expenses went up, blah, blah, or do you just say this is what it is and give no explanation?
Most Popular Reply
#2 Managing Your Property Contributor
If you do it regularly, the tenants expect it. In some areas, there are caps on the amount you can increase it by (so that gives you some guidelines). Others, there aren't any. There are different approaches. First check if there are caps in your area. Then look to see what market values are for rent, inflation rates, how much your costs have gone up and use one of those. How much you increase the rent by also depends on the current rent (eg $50 on $500 rent vs $1500 rent).
I'd start by looking at how much your expenses have gone over since the tenant moved it, seeing how much you'd have to increase rent to cover those and then compare it to the current rent and market value for other rentals.