We can all agree that one of the biggest goals for owning a rental property is to make money. You want a return on your investment, after all, not enough to just cover the costs. So when it comes time to renew the lease agreement on your rental, one of the foremost questions is raising the rent. Do you increase it? If so, by how much? Do you keep it the same? Before you make your decision, make sure to consider these few points.
Is Raising the Rent Allowed?
The first thing to take into consideration when thinking about raising the rent is if your lease allows for it. More often than not, leases don’t allow for an increase in the middle of the agreement. This means you’ll have to wait until it comes time to renew the contract.
Check the Market
Tenants now a days are very savvy and know how much is too much. Many keep an eye on the market as closely as landlords do. That being said, be sure to check what the market says when considering whether or not to raise the rent. Check comparable properties and see what they’re renting for. If the market allows for it, try raising the rent. If it looks like comparable properties are going for close to the same rate or even below it, consider keeping it the same.
Remember Raising the Rent Can Lead to Tenant Turnover
Raising the rent isn’t always something tenants will agree to and if you’re not willing to budge, it may result in them giving notice and looking elsewhere. So if you need to raise the rent, remember you may end up with a vacant property instead. A rental vacancy is the biggest expense a landlord can incur. Make sure to consider if the increase is worth the turnover.
Another thing to consider is that every time your lease is up, you’re competing with other rentals in your area. Check and see what other properties are renting for when considering the new rate. And if possible, consider raising the rent just below market value to stay competitive and potentially decrease tenant turnover.
The rental market changes. Prices don’t always stay the same from year to year, and supply and demand are the big determining factors. So when it comes time to evaluate your rental rate, be sure to take the market into account. And remember that owning a rental is a long-term game. Rents rise and rents fall, so don’t be discouraged!