A lot of times, rental property owners will come to our team at New Heights Property Management and ask us to look at their rental property. We will take a look at the property and evaluate the amount of rent they’re charging their current tenants. Often, we are surprised at the rental amount because the property owners are actually leaving a lot of the money on the table by not charging market rents.
Keeping Rents Competitive with the Market
When we ask property owners why their rents are so low, they will often give us reasons such as they never got around to raising the rent or they didn’t want to raise the rent because they like their tenants and didn’t want to give them a reason to leave. Usually, the problem is that the landlords don’t really understand the market. A good tenant won’t leave because your rent is comparable to what other landlords are charging. You don’t want to lose $200-300 per month in rent just because you don’t understand the market and what it will allow.
So, once we tell the owners that they are charging less than they should be, they want to know how and when to raise that rental amount. It’s important to be strategic, especially if you have not raised the rent in a long time.
Best Times to Raise Your Rent
Before you raise your rent, you need to think about a few important things:
- What is going on in the market? How much of an increase can it support?
- What is going on with your expenses as a property owner? You might need to charge a little more to accommodate rising maintenance expenses.
- What is the balance between raising rent to cover your expenses without hurting your tenant financially to the point they want to leave? Vacancy and turnover costs can be expensive.
Every year, when your lease is about to renew, we suggest you look at having some sort of a minor adjustment in your rent. Even if it is $25 – $50 per month, your tenants will get comfortable with the idea of a rental increase every year.
If you don’t raise your rent every time the lease renews, you’ll find that after two or three years, your property’s rental value is grossly lower than it should be. That means you won’t bring in as much money as you can for that rental property, and both your cash flow and your long term ROI suffer.
Rental Expenses Increase Regularly
Remember that it’s going to cost you more to rent out your property from year to year. Your property taxes are always going to go up, and other expenses like your insurance costs and your repair needs will rise as well. So, you need to make sure you are passing those increasing costs onto your tenants so you can make sure you are getting the best return on investment from your rental property.
If you have any additional questions about the value of your rental property or what you should be charging, please feel free to contact us at New Heights Property Management.