Raising your tenant’s rent

*NOTE – This article was originally written in August of 2006 for the newsletter.

Assuming there is no long-term lease, rents can be raised at any time. If the existing tenants are of poor quality, you might consider raising the rents in one step. However, if you have quality tenants that you wish to retain, the situation is generally more delicate.

One method you can employ is to gradually increase the rent. The shock of a $200 a month jump in rent will scare off many tenants. However, if you enforce this increase gradually over six months or a year, you may be able to ease the process of transition. Financial incentives can also be effective. A discounted rent for a month or gift certificate can help to ease the transition in pricing.

Whether you are raising the rent gradually or all at one time, one key to retaining tenants is honesty. If you simply post a notice on the tenants door saying that you will be raising their rent significantly, their likely response will be one of annoyance. Do them the courtesy of explaining why you are raising their rent, whether verbally or in writing. A personal call or visit is more likely to achieve the desired affect than an impersonal written notice.

Another good way to raise the rents with high tenant retention is to make improvements to the property. Your tenants will view a raise in rent more favorably if they witness a tangible reason for it. You should also be proactive in performing maintenance when managing your property. Tenants often remember getting good service, but they never forget poor service.

Make sure to be careful not to scare off too many tenants at once. Raise the rent of your units one at a time to avoid having too many vacancies. Regardless of which of the following methods you utilize, you should be prepared to lose some of your tenants when raising rents.

There is no single “right” or “wrong” way to raise rents. Utilizing any of the previously mentioned methods can prove to be effective. Just remember that owning rental properties is a business. Just like any business, if the customer is not satisfied they have plenty of other places to shop.