Year-over-year inflation means that raising rent is inevitable for most landlords. Property value and demand have been rising, and so have operational costs, taxes, and maintenance fees. However, it can be hard to pass the financial burden along to tenants, especially if they’re long-term and have a good track record.
Here are a few ways to increase rent without resentment:
- Add a clause in your initial rent agreement.
Telling tenants ahead of time that rent could increase 2-3% each year is a good way to alleviate any shock that comes from raising the rent when their lease expires. If they ask, explain that a small increase each year helps cover taxes and minor repairs.
- Include details in a letter.Typically landlords send out a letter at the end of a lease to renew or go month-to-month. This is a good time to introduce the new rent price and explain your reasons. Rentwhoo.com provides digital smart contracts for you to use as easy binding template agreements for this. Did you install new countertops or upgrade the storage in your building? Make sure your tenants know that!Pointing out improvements can help take away the sting a price increase, and helps tenants feel confident that their money if going back into improving the living conditions.
- Keep rent raises to a minimum.In the case of owner-occupied buildings, many landlords choose to take a low maintenance and reliable trusted tenant over a small increase in rent each month. If you’re in it for the long-haul, it might not be worth it to potentially drive good tenants out. However, if you make the yearly increases small there’s a very good chance they’ll stick around.
- Distribute the costs.If you feel uncomfortable about raising the rent with a monthly fee, you can always consider changing how you charge for utilities. For example, if you currently cover water and electricity, inform the tenants that they will now be in charge of paying the bill and include it in their new lease. This is an especially good option if part of the reason you need to increase rent is higher utility bills.