As a landlord, you are probably wondering when you should raise your rent price. You want to make as much rental income as possible while still attracting tenants with your price (so you avoid a vacancy).
In this chapter, we’ll cover raising rent and rent control. Further below, we’ll discuss situations where your tenant may get a break on rent, such as a rental discount or a rental subsidy.
Raising Rent
Below, we’ll answer your most common questions about raising rent.
When Can You Justify Increasing Your Rent Price?
- If similar units in your location are raising their prices
- If it’s peak rental season and demand for rentals is high
- If you update your unit or make it more valuable (new flooring, appliances, etc.)
At What Point in the Rental Lifecycle Can You Raise Rent?
- When you’re finding new tenants
- When you renew your lease
If you’re in the process of setting your rent price, make sure to study your rental market, pay attention to seasonality, and consider the value of your property.
How Do You Raise Your Rent Price?
If you’re updating your rent price between tenants, then you can go ahead and write your price on your listing. Learn more about creating an online rental listing here.
You can only to change your rent price while you have current tenants if you are on a month-to-month lease. You’ll need to provide written notice ahead of time. We recommend 30 days of notice. You can provide a Rent Increase Notice to your tenants with the new rent price.
What are the Benefits and Drawbacks of Raising Rent?
The benefit of raising rent is that you’ll be making more rental income. On the other hand, you may have less interested tenants replying to your rental listing if the price is unaffordable. If you raise your rent during the lease, then you risk tenants being unhappy and potentially breaking the lease.
Rent Control
Rent control is a price limit on the amount you can charge tenants for renting your property. It acts as a price ceiling, preventing rent prices from being charged above a certain level or from increasing at a rate higher than a predetermined percentage. For instance, some cities may limit the rent price to a certain dollar limit. Other cities may say you cannot increase your rent price by more than 3% each year.
The purpose of rent control is to regulate how much individuals and businesses have to spend on real estate. It is designed to make renting affordable for renters while remaining fair to owners.
There are four states that currently have rent control in some of their cities. Washington D.C. also has rent control.
California
Maryland
New Jersey
New York
Washington D.C.
If your property is in a rent-controlled city, keep in mind that not all properties in a rent-controlled city are subject to rent control. Two common exceptions are if the building is new and if the building is owner-occupied.
Most rent-control ordinances include a way for rent to increase yearly or whenever a new tenant moves in.
What Impact Does Rent Control Have on the Rental Market?
Rent control creates an artificial supply or demand issue. This typically happens if tenants never want to move out because of the low rent price. When there is reduced tenant turnover, the supply of available rental properties goes down, making it hard for new tenants to find places to move into. On the flip side, when supply is artificially low, landlords tend to have a much easier time finding tenants.
When landlords can’t raise rent in response to rising wages or increased maintenance costs, then the landlord is also less inclined to keep the property in great condition.
Find Out About Rent Control In Your Location
Here are three resources to consider:
- Your city may have a Rent Control Board.
- You can reach out to your state or local Apartment Owners’ Association.
- You can contact a local attorney who specializes in landlord-tenant law.
Next, we’ll discuss two concepts to know about in regards to lowering rent.
Rental Discounts
Rental discounts are something you can offer your tenants as an incentive. They can be a helpful way to encourage your tenants to pay rent on time.
Here are some ideas for offering rental discounts:
- If your tenant pays rent on time for a certain number of consecutive months
- If your tenant completes maintenance or handy work on their own
- If your tenant acts as an on-site manager to help with other units on the property
- If you want to incentivize your tenant to sign a lease renewal
Rental Subsidies
Rental subsidies are rent payments covered by the government or a non-profit agency. Most cities have rental subsidy programs, which will allocate rent payments to tenants who need assistance. If your tenant is having financial troubles, you can refer your tenant to your city’s rental subsidy program. This is one way to handle late rent payments.
How to Avoid Rent Disputes
As you’re considering raising rent and rent control, keep in mind that it’s important to avoid disputes whenever possible.
To avoid disputes with your tenants about rent, here are a few things to do:
- Clearly spell out rent rules in your lease (the monthly rent price, when it’s due, and how it should be paid)
- Be fair and consistent with your rules
- If rent isn’t paid on time, then follow a set protocol
- Find out what steps to take when rent is late
Next Steps
So far, we’ve gone over several concepts surrounding rent collection:
- The Basics of Rent Collection
- First Month’s Rent & Prorated Rent
- Late Rent Fees & Grace Periods
- How to Encourage On-Time Rent Payments
- Partial Rent Payments
Up next, we’ll show you how to make the whole rent process easier by collecting rent online. Find out why collecting rent online is better than old-school checks.
Originally published at Rentalutions.
