Raising the rent on your tenants can be tricky sometimes. Handling the situation carefully will prevent tenants from leaving and lower your stress level.
Let Your Tenants Know
It’s essential that you let your tenants know there will be an increase in the rent. You should send tenants an official written notice that outlines the new rent amount and the date it becomes effective. Check your state laws to see how much time is required to notify a tenant before a rent increase.
Keep in mind that a rent increase cannot occur during a lease term unless otherwise specified. That being said, the written notice should be sent 30-60 days in advance of the lease end. If your tenant is on a month-to-month tenancy, you can raise the rent after giving the proper notice according to your state. Notifying your tenant ahead of time will be helpful in gauging your tenant’s plans for the next month or lease term. (Keep a copy of the document for future reference.) If they are not planning to renew, this gives you more time to market your property and screen potential tenants.
Be Aware of the Market Rates
Look at other rentals in your location to determine the standard market rates. This will help you establish a new cost of rent that is reasonable. Tenants will be packing their things and moving out if you charge them way more than landlords with similar units in the area. You can use sites like Cozy, Zillow and Craigslist to search for other units. Here are some tips for choosing a new rent amount:
- Look at rentals that most closely match your property’s features, such as the same number of bedrooms, bathrooms, parking, square footage, etc.
- Get the rental amounts of at least five other properties in your neighborhood.
- Research rentals that are approximately the same age as your rental property.
- Find comparisons for rental properties that best match the structure and style of your property, such as a multi-unit property, duplex, or single family home.
- Look at rental properties that have the same visual appeal as yours, like similar landscaping, outdoor amenities like a pool or swing set, etc.
Although you do not need to explain your finances to a tenant or give them a reason for a rent increase, you should always keep fair housing laws in mind. Sometimes a rent increase can happen for malicious reasons, like discrimination or retaliation.
A landlord discovers that his month-to-month tenant is gay and raises the rent on him the next month.
A tenant renting an older unit continually asks the landlord to perform repairs. The landlord, annoyed with the frequent maintenance requests, raises the rent on the tenant during the next lease term.
Here’s a sample letter you can use to notify your tenants about a rent increase:
RE: RENT INCREASE NOTICE
Dear [Tenant’s Name],
As you are aware, your lease at the above property will expire on [Date of Lease Expiration].
Please be advised that effective [Date of Increased Rent], the monthly rent for this premises you now occupy shall be increased to $_________ per month. This is a change from your present rent of $ __________ per month. The change will take effect in the first month of a new lease.
Should you wish to sign a new agreement or continue your tenancy month-to-month, this new amount would be required. All other terms of the Lease Agreement will remain in full force and effect. If you do not wish to renew your lease, please provide your notice as soon as possible or no later than the legally required date of [Date of Last Day Notice Required].
If you have any questions, please do not hesitate to contact me at [Phone Number] or [E-Mail].