Photo of a property manager negotiating a rental increase while renewing a lease.

Increasing Rent as a Landlord

Updated January 1, 1 . AmFam Team

Raising the rent doesn’t have to be stressful. By including terms in your lease agreement, you may find your tenants are prepared for small increases to their rent. Check out these great tips to learn about the best ways to raise your rent and maximize your profits.

There are many reasons why you may find yourself needing to raise the rent on your rental property. With property taxes going up annually and maintenance costs increasing every year, it’s easy to see that last year’s rent price may not be enough to make ends meet. And if your rental is part of a homeowners association, you may find those dues and fees are on the rise year after year. Rather than carry that burden yourself, you’ll eventually have to increase the rental rate.

But what’s the best way to approach the topic with a reliable tenant? What if they balk and decide not to renew? We’ve got the answers to these and other important questions that can help you understand how to raise your tenant’s rent. Take a look at our tips so you’ll know what to do when it’s time to take action.

Discuss Rent Increases in Your Lease Agreement

There are many ways to approach increasing the rent, but don’t feel obligated to justify it to your tenant. Remember, you own an investment property business. Here are a few more points to consider when you’re going to raise the rent:

Keep it annual. Place details of an annual rent increase in your rental contract. By starting your relationship with the new tenant this way, you’ll be able to reference the lease when you deliver your renewal request letter.

Increases should be modest and regular. By limiting the annual increase to $20 - $50 per month, tenants may be more accepting of the rent increase. Sometimes, tenants seek long-term rental contracts to lock in a rental rate. But by defining rent increases that will occur each year, good tenants can still have the stability of a multi-year lease and you’ll be able to keep up with inflation.

This practice saves you from having to bump the rent up drastically after no movement over a period of years. Plan out your financial goals in advance and incrementally move toward them with stepped rental increases.

Understand Local Laws and Rent Increase Notice Requirements

Sometimes, the amount of notice required depends on the percentage of the rent increase. Review your state and local statues carefully and be sure you’re in compliance. By giving your tenant plenty of time to make a decision on whether to sign on for another year, you’ll also be doing yourself a favor. If they decide to leave, you’ll have time to react to their decision and can seek a new qualified tenant. Here are a few key reasons why it’s important to know what your local laws are:

Work within mandated time constraints. Planned increases in rent require advance notice, and that figure changes locally. Most areas require at least one month, but some need a 90-day notice be delivered by the landlord.

Send physical notice. Some areas allow you to get news of the rent increase via text message or email. Even with those conveniences, it’s wise to send a certified letter with a signature receipt in order to avoid any disputes later.

Know the financial restrictions on rent increases. Be sure you’re adhering to Federal Fair Housing Act statues when adjusting the rent. Many local laws and state codes place limits on the amount rent can increase from one year to the next.

Weigh the Risk — Is the Rent Increase Worth Losing a Good Tenant?

Tenants will move on and their lives evolve. Sometimes a rent increase is all it takes for them to consider shopping for a new place to live. On the other side of this equation, you risk a vacancy but stand to boost profits by increasing rent with the arrival of a new tenant. By looking carefully at your financial goals, and weighing all the factors that go into raising rent, you’ll find the answer that best fits your needs.

Stay in Line With Market Trends

Check in with online rental listing industry leaders to be sure your rate increase is fair and on par with other spaces of similar design. There are many ways to review details on rental prices, here are a few to consider:

Determine actual market rates. Although it’s easy to search in an area for a similar space online, sometimes the two may not actually equate. For a small fee, Cozy Rent Estimate can get you in-depth details on the real value of your rental. You’ll be able to review the ways in which your rental either outperforms or lacks in amenities relative to the competition. And that insight can help you to plan upgrades to get your rental top dollar in the near future.

Validate findings with listing comparables. Plug in your rental's criteria to search for pricing on similar spaces on Zillow Rental, Craigslist and Rentometer. You’ll find a price range that can be used as a reference to determine your new rental price.

Improve the space across the lease term. If you’re making small but significant improvements on the rental over the term of the lease, your tenant will see you’re willing to invest in the property. When they get news of a rental increase, they’re likely to remember these upgrades and that can play in your favor upon signing a renewed rental agreement. By making small investments to improve your space across the year, you’ll be building rapport that can create lasting tenant relationships.

While you’re considering increasing the rent, be sure to circle back with your American Family Insurance agent (Opens in a new tab) and discuss upgrades you’ve made to the space. If market values have really increased, you’ll also be glad you revisited your policies because you’ll have the protection your real estate investment demands.

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