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Do you want to raise rent on your real estate property but don’t want to risk losing your tenant? These 7 strategies may help you get out of this dilemma.

Rents are increasing all over the US, and many homeowners are facing the age-old real estate dilemma once again. Should they raise rent and risk losing their existing tenants altogether? Or should they stick to the current rate, retain the tenant, yet lose the extra income?

If you too, dear reader, are facing this issue, then I have your answer in this article. I’ll tell you about 7 practical and unheard-of strategies that could get you a raise in rent while retaining your tenants.

Key Takeaways for this article are as follows:

• Don’t Raise the rent above the market rate.
• Get your tenants accustomed to an annual raise in rent.
• Do a fair market analysis.
• Review the existing lease.
• Read your States and Local Landlord- Tenant Laws.
• Explain to the tenant why the rent is increasing.
• Give a proper notice before raising the rent.
• Make all necessary upgrades before going for a rent raise.

When Should You Raise Rent?

You can raise rent when the existing lease expires. You can increase it frequently if the lease has a provision that allows for the rent to be increased before the lease expires.

If your tenant is on a month-to-month lease, you can raise the rent by giving a notice (more on that later). This “notice period” is usually 30 days in most states.

However, this raise depends on the city or state (where the home is located) and its rent control laws. You’ll need to consult with a qualified realtor to ensure that you can take this action.

Things to Consider Before You Raise Rent

Naturally, you can’t just raise the rent arbitrarily without considering some underlying themes. So here I’ll be going through them in detail.

1. Don’t Raise The Rate Above The Market Rate

It goes without saying that if you raise the rates more than the market rate, your tenant will not renew the lease. I’d strongly advise against it, as it’ll leave you with an empty home and lost rental income.

Moreover, word may spread that you’re charging more, deterring people from moving into your property.

2.  Get Your Tenants Accustomed to An Annual Raise in Rent

This strategy to raise rent can work wonders for both you and your tenant. Get the tenant accustomed to annual raises, instead of every month, quarter, or six months. This will ensure your tenant is prepared for the raise and can move out when the lease expires.

Speaking from experience, this strategy can work best if you’re going for small annual increments. This way you don’t surprise the tenant with a big number at the lease’s end.

7 Strategies to Raise Rent While Keeping Your Tenants

I have seen time and again that tenants are way less likely to complain about a raise in rent when 2 things happen. The first being a well-maintained home, and the second being them receiving fair treatment.

But I have 7 tips that will help you get out of this pickle and ensure you raise rent too.

1.  Do A Fair Market Analysis

I understand that as a homeowner, your biggest priority is to reap the benefits of your hard work. After all, the property is your investment. You can do this by running rent comparables and checking for rates of similar properties in your area.

Know this, your rates should be around the market level. If you price it too high, it’ll be out of reach for a lot of people.

If you price it too low, you’ll attract penny-pinchers who’ll cause a lot of trouble down the road. So a fair analysis is crucial. For this, you can either use online tools, or consult a trusted local realtor for their services.

2.  Review The Existing Lease

After knowing your home’s current rent value, the next step is to review your existing lease. If you’re renting out your property for the first time, you’ll need the expertise of a realtor to guide you regarding the terms.

The lease should be clear for both you and the tenant regarding rent. Matters related to the frequency of the rent raise and an advance notice before the raise should be clear.

Moreover, you need to be clear on the limits to how much can the rent be increased.

As a rule of thumb, if your tenant has a 1-year lease, the rent will increase once a year, when the lease has expired.

However, if the lease is for more than a year, say 2 or 3 years, the situation will be different. Now you’ll have to until the end of the lease to increase the rent again.

3.  Read Your State’s and Local Landlord-Tenant Laws

If your rental property is in a city or state with rent control laws, things can get a bit complicated. In these cases, there will be rules in place that limit your rent raise. Some jurisdictions have gone ahead and have rules prohibiting any raise in rent at all.

California for example has statewide rent control limits. Meanwhile, Sacramento and Los Angeles have city-specific laws too. Yet states like Arizona and Texas have laws that pre-empt rent control.

I’d recommend using the National Multifamily Housing Council (NMHC)’s interactive map of rent control laws by state. It’ll be immensely helpful for you to learn about local rent control.

4.  Explain to The Tenant Why The Rent is Increasing

Call your tenant or set up a time to visit in person to tell them about the raise. It is no secret that rent prices are increasing in many real estate markets. So your tenant might not be surprised that their rent’s going up as well.

With that said, communicating your ideas clear with a nice dose of empathy is necessary. This way, you won’t just raise rent, you’ll also keep your tenants.

One way of doing this is by giving examples of other nearby homes that increased their rents. Another method is to tell your tenant the operating cost of the home. And that if they wish to live there for longer, they’ll have to expect a raise.

5.  Give A Proper Notice Before Raising The Rent

It goes without saying that you need to tell your tenant at least 30 days before you raise the rent. This is so that they may opt to move out if the new rent seems unaffordable to them.

However, I would recommend you to go for a 90-day notice period. This is the standard business practice and gives both parties ample room to negotiate too. There are free rent raise templates available at sites like Law Depot to give you an idea.

6.  Offer A Small Discount

You can pair this raise with a small discount if you’d like. I’ll be honest, I haven’t seen this happen many times in my career, yet it seems to work. Tenants are more inclined to accept a raise when you decrease it a bit.

For example, if you’re going for a 6% raise, offer a 2% discount if the tenants accepts in 30 days. If they accept in 60 days, they’ll get a 1% discount. You can also offer them something different as a discount, like a complimentary carpet cleaning, or a gift card.

7.  Make All Necessary Upgrades Before Going For A Rent Raise

Make tangible and useful upgrades when you go for a rent increment. Let’s face it, you and I too wouldn’t like to live in an old home that keeps getting costly, yet its quality stays the same.

So, get the premises cleaned, replace outdated appliances with new ones, or get a paint job done. Consulting the existing (or last) tenant regarding what they need (or needed) the most can be a good start.

Summing  Up

I would strongly recommend you to gradually raise rent on a year-on-year basis. This gets your tenants used to increases and they can leave when they no longer wish to pay more. Quoting a fair rate, giving notice in advance, explaining why the rent’s increasing and offering a discount are all useful.

Finally, know your lease agreement and your local city, county and state laws. You can use a professional realtor’s assistance in these cases if you wish to.