Raising rent without conducting due diligence can severely impact your bottom line. This is especially true if it makes the rent amount way too off the prevailing market rate.
If you end up overcharging tenants, prospective tenants will find your unit less desirable. And if the rent amount remains below the prevailing market rates, you won’t be able to optimize the return on your investment.
Increasing rent is almost always inevitable in the life of a landlord, especially when factoring in inflation, running costs, property improvements, and effective rent collection. However, it’s essential to approach it the right way!
So, how can you successfully raise rent without losing a good tenant? The following are tips to help guide you on when and how to go about the process. Keep reading to learn more!
Strategies for Successfully Timing and Implementing Rent Increases
Check Local Laws
As a landlord, there is a smorgasbord of laws that you must abide by. And this includes rent. Some states require landlords to abide by things like limits on rent increments, and notice requirements. And in other states, such requirements are nonexistent.
The state of Oregon belongs to the former group of states. It has statewide rent control and state law prohibits local jurisdictions from enacting their own rent control laws. The following are some key things to keep in mind.
- A rent increment must not exceed 7%, plus the consumer price index (CPI) per year. This year (2024), the total is 10%. If charging a monthly rent amount of, say, $1,500, then it means you must not increase it by anything more than $150 per year.
- You can only make the increment in a new lease agreement. Existing tenants are exempt.
- The increment must not be due to discrimination of state or federally protected classes.
- The increment must not be a retaliatory act against the tenant for exercising a legal right.
- You must notify the tenant of your intention to raise rent beforehand.
Include Details of Rent Raises in Your Lease
Generally speaking, tenants are usually expectant of a rent raise after their lease expires. This is especially true if their tenancy has surpassed a year.
With that in mind, consider including details of the rent increases in the lease to avoid potentially blindsiding the tenant.
Include details such as the expected percentage increase, the advance notice, and when they can expect the raise.
Also, remember to require the tenant to give notice as to whether they plan on renewing the lease or moving out. This will help you prepare for the next phase.
Do Some Research
Research is key when it comes to raising rent. The last thing you want is to make your unit less desirable in the eyes of existing and prospective tenants.
And just because you can raise the rent doesn’t mean you have to! But if you have to, conduct due diligence.
You can conduct your research in various- or a combination of ways.
You can interview landlords renting out units in the area. Go for ones that rent out similar units as yours. That is, have the same size, equal number of bathrooms and bedrooms, and share similar amenities.
You can also take your research online. An online site like Zillow can provide you with valuable data if you use it right. The following is how you can go about the process.
- Head over to the site and enter the area where your property is located.
- Select “rentals” from the dropdown menu.
- Zillow will display a list of rental properties in the area. You can further refine the search using filters like property type, price range, square footage, and number of bedrooms and bathrooms.
After completing this step, the properties will be displayed along with their current rental prices.
From there, compare these prices to the amount you plan to charge the tenant after the rent increase. Will your new rate align with the prevailing market standards?
Look At the Vacancy Rates
Is finding new great tenants in your area easy or difficult? Does your property stay vacant for long periods before getting filled? If so, then raising the rent on the unit will only make things much worse for you.
However, if your property is located in a great area with constant demand, then raising rent can be a great idea. This is especially true if you have done your due diligence by comparing the prevailing rental rates in your area.
As you probably know, vacancies can hurt your bottom line. This is because you’ll be operating at negative cash flow. In other words, your investment will be bleeding money with every month that passes.
If you’re having a hard time filling a vacancy and can’t explain why, hire a property manager. A good property manager will assess your situation and provide you with workable solutions.
Upgrade the Rental Unit
Upgrading your rental property can refresh its appearance and curb appeal while also boosting your return on investment.
Neglecting repairs can negatively impact your property and tenant relationships. Tenants are less likely to agree to higher rent if maintenance is overlooked, and they may decide to move out once their lease ends.
Being proactive with repairs is an important part of successful property management. Maintaining the property not only supports your case for a fair rent increase but also encourages tenants to renew their lease when they feel the adjustment is justified.
Conclusion
Now you know when and how to raise rental prices. Simply put, understand the applicable rental laws and conduct due diligence on comparative rentals.
But if you’d rather work with a professional to help you do it right, then look no further than Campus Connection Property Management. We’re a top choice among rental property owners in Eugene, AR. Get in touch with us to learn more!
