Rental rate. It’s a critical factor. It’s the reason you’ve picked this asset class as your investment, and ensuring it provides the greatest return is your highest priority. But raising the rent can be a challenge. People are sensitive about money and no one wants to pay a higher price for exactly what they currently have.
The truth is, inflation happens. Just like property taxes and other associated costs with houses rise each year, so too does the cost of living in an apartment, and tenants should expect this within a reasonable range. So, when it comes time for lease renewals and you’re facing the need to adjust rental rates to correspond with demand, the market, and the economy, these helpful tips should help ensure tenants respond positively by continuing to pledge their loyalty to your property.
1. Be strategic.
Don’t just say “It’s time for the annual rent raising event,” and send out notice. Do your research. What is the current rate of economic inflation? What are comparable properties charging for their units? What separates your properties from others that warrants additional rent? Do you have additional costs? Are there amenities that have been added that must be shared?
2. Talk it out.
Once you’ve done your homework, make sure you communicate what you’ve found directly to your tenants in a well thought out letter that tells them not only about the rental rate increase, but also the specifics about why it’s occurring. No one wants to hear “your rent is increasing” with absolutely no mention of why. Justifying the hike will help tenants to be more receptive, especially if you’re able to successfully show them all the benefits they are getting for the rate.
3. Give time.
Don’t spring a rate increase on a tenant the day a lease is to be renewed. Be thoughtful and provide at least 30 days’ notice, in writing.
4. Sweeten the pot.
Want to entice a great tenant to stay despite the hike? Consider sweetening the pot. Raising the rent less than it is raised for incoming tenants, providing complimentary access to amenities or parking, and offering aesthetic upgrades in their current unit are just a few examples.
You will most often find that when you approach people rationally and strategically, it’s easier to accomplish your goals.