How to Raise the Rent

Prices are going up everywhere, at the supermarket, the gas station, for utilities, for the phone connection, as well, real estate tax bills. So why on earth would a landlord not want to raise the rent on his property. It is simply quite amazing how many landlords procrastinate on the issue for simple reasons, such as:

1. Being shy to confront.
2. Worried a tenant might vacate.
3. Because, they are on friendly terms with the tenant and do not wish to damage a good relationship.
4. Because, they are tenant shy or fear dealing with him / her.
5. Feel the rent is high enough, already.

But, there comes a time when every landlord is faced with the prospect of increasing the rent. No doubt, rather unpleasant for the tenant, still a landlord must do what he has to must do. Don’t put it off; decide on having regular rent increases keeping the amounts small, so as not to rock the boat. Over time, the tenants will get used to the rent increases without getting offended.

Actually, it would be a good idea to include rental increases in your lease agreement. Schedule a small rent increase every year, and by the end of every year, you should have a tidy sum. A $25/- increase for every rental property you own, works out well, as it is not large enough to pinch the tenant, but an extra $25/- from each of your rental property works out well for you. And, if tenants question the increase, simply remind them of the following:

1. A raise in taxes.
2. A higher mortgage monthly payment than the rent charged = negative cash flow.
3. Escalating cost of living.
4. Enforce the lease, after all the tenant has agreed to rent increase by signing it.
5. Quote high property maintenance costs.
6. A rent increase works well when you want a tenant to leave without serving an eviction notice.
7. If the tenant is not treating your property well, insist on a rent increase to cover for the wear and tear.

It is recommended landlords draft a Rent Increase Letter, notifying tenants of the increase in rent, when it takes effect, and what the new rental charges will be, from the effective date. Draft a polite notice that reaffirms all terms and notice periods agreed to in the rental lease, and confirm they remain in force.

Serve the notice within the 30 or 60-day period agreed to in the lease, also it would not be a bad idea to serve it early to allow the tenant time to get used to the increase or decide whether he / she wishes to continue renting the place or not. But, check the lease just in case it says rent cannot be increased until Notice of Lease Renewal is being issued. Send a Tenant’s Intention to Vacate Letter along with the rent increase notice, in case the tenant does not agree to the proposed increase in rent, preferring to move out instead. It also sends out the message you are alright with the fact that the tenant might wish to vacate your premises, instead of paying a higher rental sum.

As to the rent increase amount, it all depends on the rental market, quality of the tenant and how much you want him / her to stay on, including availability of new tenants who pass the tenant screening test. For a tenant you wish to retain, keep the amount low, in case of a tenant you would rather get rid of, make the increase a painful one.

Play it by ear, go get what you deserve, but just don’t dilly dally about a simple thing such as increasing the rent! Everyone is doing it and there is no reason you should not get higher returns for your property. After all, like everyone else, you too have bills to pay!