Raising Rent: When and How Much?
September 21, 2013
By Tracey March
As a rental property owner, your desire to increase your rental income, and thus the rent, inevitably conflicts with your tenants’ wishes to have rent remain the same. Some landlords hardly ever raise their rents, while others seem to raise them significantly and frequently.
So how do you know when to raise your tenants’ rents? First you need to know if you’re subject to rent control laws, so find out if your state allows rent control, if it has laws that preempt rent control, or if it is silent on the issue. If you live in California, New York, New Jersey, the District of Columbia, or Maryland, or a state that doesn’t prohibit rent control, your city might limit how much you can raise the rent, so be sure to check with your local jurisdiction.
If you aren’t subject to rent control, here are some tips and guidelines for figuring out when and how much you should raise rents:
- If your tenants are on a yearly or other fixed-term lease, you can raise the rent when the old lease terminates. Just include the new rent in the new lease, and give your tenants the courtesy of letting them know that you intend to raise the rent a month or two before the old lease is over.
- For month-to-month leases, you’ll need to give the tenants proper notice of a rent increase, which is usually thirty days, but can be longer.
- Some states and cities have special notice requirements for rent increases, so make sure you check your state and local landlord tenant laws.
- When you raise the rent for one rental unit, make sure you raise it for the other units when those leases allow you to, or you could be subject to a housing discrimination claim under fair housing laws or claims of retaliation. Tenants want to be treated fairly, and if they feel like they’ve been singled out unjustly, things might not go as smoothly as you’d like.
- Some rental owners have a policy of increasing the rent, even a small amount, every year. This way their tenants expect that rents will increase when their new yearly lease is signed, and they don’t feel blindsided by bigger but less frequent increases. If you do plan on annual rent increases let your tenants know before they sign the first lease so they know what to expect.
- Consider linking your rent increases to the consumer price index (typically 2% above CPI), which in past years has led to increases of about 5%.
- Another way to figure out how much to raise rent is to look at current market rates for your area. Sites like rentmetrics.com allow you to find rent comparables for your area. Craigslist is another great resource for comparing rents in your area, especially if photos are provided to compare the quality of the interiors.
- One landlord suggests that raising the rent $5-$10 a month doesn’t usually cause any problems; raising rent $25 or more seems to be the point where the grumbling begins.
- If you don’t want to deal with figuring out how much to raise rent, when to raise rent, or notifying your tenants of an impending increase along with updating all the leases, consider hiring a property management company. One of the many things a property manager can help you with is setting the rent, as well as updating the leases to reflect the new rent, and maintaining a paper trail so you don’t have to worry about fair housing act issues or claims of retaliation.
Do you have any tips for when and how much to raise rent?
As always, the information provided here is just that–it is for informational purposes only and is not legal advice. If you have any particular questions or issues, please consult an attorney.