As the buffer between a landlord and tenant, we as property managers hear and perform rental rate increases frequently. Raising rents can allow you as the landlord/property owner to profit more money. Well, that is not always the case. Sometimes you can lose money and good tenants if you get too greedy.
There are typically two scenarios that are common for rental rate increases. Renewing your rental rate with a current tenant or re-listing your property for a higher rental rate and landing a new tenant at a higher rental price. Running a profitable rental property portfolio is supposed to operate as a business, and in business, your profits should continue to increase. There is a fine line between increasing your rental rate and pushing away good tenants. Typically with rental property common sense, you can find the equilibrium between profitability and another unwanted vacancy. As a property management company, we deal with rent increases all the time. Whether you are a new landlord or an experienced rental property owner, you can benefit from these simple tips below for raising rent and keeping good tenants.
Simple Rental Rate Increase Tips:
Serve your lease renewal (w/ price increase 60 Days) before lease expiration.
Rental market analysis to gauge the area and subdivision for the correct "Market Rent."
Appropriate rental rate increases.
Express your gratitude towards good tenants.
Get the tenant on a new lease with a current rate increase.
Serve Lease Renewal Notice
Your lease renewal notice should be distributed per your lease agreement. We suggest lease renewal terms being, "Landlord or Tenant shall have 60 days to notify each other in writing before the lease expiration date of an intent not to renew the lease." Leases typically either state a 60-day notice or a 30-day notice. We suggest being proactive with renewals and rate increases. If you have good tenants, of course, you want them to stay. As the landlord, call or email your tenant and express to them, you would love to have them for another term. At this point, use your feelers to see if they are planning to renew. Make sure you serve an official notice following state law and regulations regarding lease renewals and rent increases.
Rental Market Analysis
To accurately gauge what your rental property should be renting at, you need to know how to set the rent for your rental property precisely. In short, you will need to analyze what comparable rental properties leased for in your direct area and subdivision. This will give you a good idea of the rental increase to pass through to your tenant. In some instances, we see landlords being way under market value or above market value. Doing your homework will give you the best idea of where your rental rate is positioned within your market and area.
Appropriate Rental Rate Increases
We suggest a slight increase if your tenants have been great; the goal is to keep your tenant while increasing your rental rate. A profitable rental property has everything to do with a tenant occupying and paying rent every month. A vacant property doesn't do anyone good. As property managers, we hear absurd rental increase requests. We have lost good tenants due to property owners requesting too much for increases. The danger of overpricing your rental property is missing out on another year of stable cash flow. If you're looking to increase your rental rate by 12%, then you may want to look at other investment strategies. Working with property owners and landlords, we like to shoot for a 3% increase at renewal time. Our goal is to maximize profits without pushing a good tenant out. If you are self-managing your rental property shoot for a 3% increase, although if you have great tenants, it may be beneficial to do the minimal increase to keep them put.
Expressing Landlord Gratitude
In the world we live in, everyone enjoys feeling wanted. The same goes for a landlord-tenant relationship. Express to your tenant that you would like to have them for another year. Communication between landlord and tenant can be mutually beneficial during the lease term and at renewal time. Communicating your gratitude may be the difference between having an occupied rental and a vacant one.
Getting Your Tenants On A New Lease
Good news, your tenant would like to renew their lease! Keeping your tenant in your rental property is the ultimate goal, and you have successfully restored your contract with an increased rental rate. To properly do this, you had to draft a new lease agreement and send it to your tenant for signatures. As a professional property management company, we suggest you resend your full lease agreement with the rate increase, versus just sending an addendum. Once your lease renewal agreement is signed, you are all set for another term.
Property Management Conclusion
Congratulations, you saved yourself thousands of dollars in vacancy costs! If you have a great tenant, the number one goal is to keep them in your rental. If you have followed our guide to successfully increasing your rental property, you have navigated the renewal pitfall. Here at The Listing Real Estate Management, the most reliable source for property management in Orlando, Florida, we specialize in renewing tenants at mutually beneficial terms. Feel free to Contact Us here with any questions and as always share this article to help fellow landlords.