When it’s time to raise the rent on your rental property, make sure you proceed with caution. Raising the rent too much or too quickly can leave you with an empty property after you tenants leave in frustration. However, avoiding a rent increase that’s large enough to cover your expenses can cause you to lose money on your investment.
There are a lot of things to consider when changing the rent. As a landlord, setting the wrong rental price is a costly mistake.
Let’s dive into when it’s appropriate to raise the rent for your Highland Park property and how to do it successfully.
Is a Raise in Rent Justified?
First, consider your reasons for raising the rent on your property.
- Has the local market changed? When your property is located in an up-and-coming or desirable area, property values can increase. If rents around your property have increased to reflect changes in the area, it might be a good idea to also raise the rent on your home.
- Have your expenses increased? Whether it’s higher costs for maintenance contractors, property taxes, inflation, or other factors, raising the rent is often appropriate to offset your rising costs.
Evaluate the market research on your area. Take a look at your finances and goals.
While you don’t have to provide a reason to your tenants for a rate increase, it’s a good idea to make sure your reasons support the increase.
One crucial key to success as a landlord is maintaining good relationships with tenants.
A significant increase in rent is a great way to ruin a tenant relationship.
If your research supports an increase in the rent for your rental property, start small. Your tenants chose your property in part because they could afford the rent. They felt like the value of the property was consistent with your price for living there.
A significant increase in rent without added amenities could send good tenants packing to another property. Avoid raising the rent just to “make more money” from current tenants.
A monthly rate increase of $25-50 is more manageable for a tenant than a jump of $100-200 per month. A good rule of thumb is to increase no more than three percent annually to account for the cost of living increases.
If your expenses are more than three percent, use a small rate increase along with appropriate cost-saving measures to make sure your properties stay profitable.
With a large increase and tenants who decide not to renew their lease, you’ll lose more money on an empty property.
Inform Your Tenant
Never increase the rental rate on your Highland Park property without plenty of notice to your tenant.
Even if you have a sudden increase in your expenses, don’t pass that on to your tenant. A sudden rate increase is poor management of your tenant-landlord relationship.
Give your tenants 90-days notice of a rent increase.
The ideal time to re-evaluate the rent price is when it’s time for a lease renewal. Plan your market research and the evaluation of expenses to give yourself plenty of time to decide on an increase before it’s time for tenants to renew.
Let them know their renewal will include a price increase and the amount of the increase. Your tenants will appreciate the advanced notice. This gives them time to evaluate their finances and decide to stay with a landlord who takes good care of them.
The advanced notice also gives your tenants time to find another home if they decide they can’t absorb the rent price. With the lead time, you also have time to find new tenants for your property, so you don’t lose a month’s worth of rent.
Know the area landlord-tenant laws. Laws can change at any time. Be sure you keep up with requirements for communication and anti-discrimination.
It’s okay to raise the rent to help offset justified expenses. However, it is not okay to raise the rent to discourage a tenant from continuing to live in your property – at that point you can decline to renew the lease instead.
Consult with a property management company about Federal laws and the laws in Texas when it comes to raising rent and how to handle it with tenants. Professional property managers stay up to date with all tenant-landlord laws.
Don’t Be Afraid to Raise the Rent
If your investment properties aren’t making money, what’s the point of all the work you put into being a landlord?
Your bottom line is critical. Don’t be afraid to raise the rent if it’s necessary.
However, it’s also critical to handle it well. Maintain an excellent tenant-landlord relationship while covering your expenses and seeing a profit from your Highland Park property.
Know the value of your property to understand how to set the best rent price. The right price reduces tenant turnover and supports your business goals.
Let Uptown Dallas Property Management help you with a FREE Rental Property Analysis. Our property management expertise in the Dallas area helps us quickly determine if you can get more out of your investment.