Are you debating about Raising Rents?
The decision to increase rent at the time of lease renewal can be sensitive and tricky for many property owners. As a landlord you may be thinking the math is easy; to increase revenue from your rental property you should simply increase what you charge tenants each month. However if you dig a little deeper you’ll realize that raising the rental price can be a delicate matter. One that should be approached with insight and care to avoid losing trust worthy and dependable renters.
Price of rent is often the biggest factor in whether tenants decide to stay and renew their lease or start looking for a new place to live. According to Lindsey Schober at Zillow, the general rule of thumb when it comes to increasing rent is as follows: “You should increase rent every year, even just a few percentage points, if permitted by applicable laws and the terms of your lease agreement. This way your tenants are prepared as each renewal comes around and less likely to move out due to sticker shock, while you are better able to plan for the year ahead.”
Once you have decided to increase the price of rent, you need to determine the amount or percentage of increase. Following the recent rent control laws in Santa Barbara county, landlords are allowed to raise rent by 5% plus cost of living per year. It is important however to ensure you find the “sweet spot” where your rent is fair and slightly competitive in the market place.
Realtor.com put together a basic list of landlord rent increase do’s and don’ts which can be helpful and important for any landlord to be aware of. Rent can generally be increased when the lease is expired unless otherwise specified in the tenancy agreement. Landlord (or property manager) must give a written notice of the rent increase at least 30 days before effective date.
The notice can be a template form or a handwritten letter. In the case of a written letter it’s important to keep it professional and to the point but also to maintain a warm and polite tune.
You may choose to provide a brief explanation as to why you’re increasing the rent. It could be because of rising costs in areas that are outside of your control, or recent improvements and enhancements to the property.
Your rent increase letter should include the following important information:
- Tenant’s name
- Property address
- Landlord name and contact information
- Date the letter is written
- Date the rent increase will take effect
- Amount of rent increase
- Current cost of rent
When sending the rent increase notice, you can either hand deliver it or mail it via certified class mail with a return receipt. You want to ensure the tenant acknowledges the letter so there’s no confusion later on. You can then follow up via email. If you choose to mail it, allow time for the letter to travel before starting the number of days of notice.
If you are hesitating about increasing rents on your rental property and require assistance in preparation of notice letters and communication with tenants, we are here to help. Contact us at H&H Real Estate Services for more information.
