With each passing year, as the value of your investment property goes up, the market rent you can charge also goes up. If you raise your rental rates along with your property’s value, your monthly cash flow increases.
And that’s what all investors want, right?
But raising rent on existing tenants isn’t always easy. In fact, raising rent should be a process that’s carefully approached and tactfully discussed with your tenants. If done correctly, raising rate can help you keep your current tenants while also ramping up your monthly cash flow.
At HUNTAHOME, we provide outstanding property management in Dallas and Fort Worth — including handling leasing, rent collection and rent increases for our clients. To help you get started, here are 5 tips for raising rent on current tenants:
- Maintain Strong Relationships
It’s always a good idea to maintain strong relationships with your tenants. This is true for any number of reasons, but perhaps the most important reason is this: It’s far easier to raise rent on a tenant with whom you have strong relationship than on a tenant with whom your relationship is combative.
How do you build strong relationships with tenants? Start with responsiveness. When tenants get in touch, treat their calls or messages as urgent requests. Also, spend some time getting to know your tenants beyond just the tenant-landlord relationship. Ask about their jobs, their families, their interests, etc.
If you build a relationship on responsiveness and care, your tenants will be far more amenable to rent increases.
- Set Expectations By Raising Annually
Never let a year pass without raising rent. Even if it’s just 1%, raise your rates on an annual basis.
Why? Because tenants are far more accepting of small increases on a yearly basis than they are of large increases every 2, 3, 4 or 5 years. For example, tenants will be more accepting of 1% hikes each year than they will be of a 10% hike after years of no increases.
Raise your rent each year, and your tenants will come to expect the annual increases and to view them as facts of life — not as reasons to shop for a new rental property.
- Minimize the Surprise
You have to submit rent increases in writing. But don’t just send increase information via email or traditional mail. Rather, give your tenant a call, spend some time asking about your tenants life, and then let him or her know that a letter is coming.
Simply taking surprise out of the equation can make the difference between a tenant that accepts the increase and one that starts looking for a new place to live.
- Offer an Alternative
It’s always nice to increase your monthly cash flow by raising rent. But, that said, there are other ways to boost your investment without raising rent on existing tenants.
When you’re planning to raise rent at a certain property, consider offering your existing tenant an alternative. For example, if you’re planning to raise rent by 5%, offer to keep the old rate if your tenant signs a longer contract. Give him or her the option of signing a 1-year lease at a 5% increase or signing a 2-year lease at the previous rate.
If your tenant opts for the latter, you’ve removed the possibility of vacancy (and its associated costs) for at least 2 years, which might be more valuable than the 5% increase over a single year.
- Make it a 2-Way Street
Soften the rent increase news by asking about the property. What repairs need to be made? Do appliances need replacing? What maintenance tasks have gone uncompleted for too long?
By asking about the property, you’re implicitly suggesting that the rental property your tenant will be paying more for in the coming year will also be a nicer and more updated property. You need not follow every recommendation your tenant makes, but executing on just a small portion of the repairs and updates will create goodwill.
Let Us Handle the Rent Increase Conversations
As a real estate investor, you have so much to do and think about on a daily basis. That’s why it’s so helpful to have a trusted provider of property management in Fort Worth and Dallas. When you hire a property manager, you never again have to worry about having uncomfortable conversations about rent increases.
At HUNTAHOME, we are your best option for property management in Dallas and Fort Worth. We offer a depth of experience plus a wealth of local market knowledge, which helps us provide effective and comprehensive DFW property management services — leasing, rent collection and rent increases included.
Get in touch today about our DFW property management services.