Increase Rent without Losing Tenants
Landlords must raise their rents periodically to keep up with
market rates and make a profit. Rental rates should be set at the
highest amount the market will bear, but how do you increase rents
without the fear of losing tenants? There are several ways a landlord
can raise leasing rates, and still keep the majority of their renters
A good landlord will research all of the options and keep the needs of their tenants in mind, without sacrificing the requirements of their business. All individuals want to lease their space at the least amount possible. The challenge is determining what is low in the eyes of your tenant compared to an amount that would be considered excessive.
Tenants want a realistic picture of what your property has
to offer. If you exaggerate the amenities or other aspects of the
space you are trying to lease, individuals will be less likely to
except an increase in rent. One of the best ways to find out if you
are in the right ballpark is to check out properties in the
surrounding area, which are providing similar facilities and extras.
Successful landlords will do their homework, before implementing a rent increase. This will require that they get familiar with other rental places, as well as the types of rent they charge. Then compare the amenities they offer to what your property has. The next step will be to determine the vacancy rate for similar properties in the general vicinity. High vacancy rates will make it more difficult, but not necessarily impossible to raise rents. If your property offers more than the competition, you can still raise rents without losing tenants. Regardless, evaluating other properties can be a tricky subject to tackle. Getting to know your competitors is not simple task, since a majority of them will want to guard this vital information, but a little undercover work can go along way. Once you get a clear picture of these things, then you can adjust your rates according to the current market and entice reliable renters to come your way. One important thing to keep in mind here is that you should be charging your tenants for the luxuries you offer rather than trying to outbid your competitors for the lowest price in order to gain more tenants.
Every landlord has to be a good seller, but a realistic one. Tenants don't always recognize the differences in rental spaces, as they would two automobiles or cable versus satellite. It is your job to educate prospects on the amenities you have to offer, and what makes your property more desirable than the competition. For example you and a competitor up the street may have the same rent, but you offer more amenities, which could warrant a rental increase. Although your rent is higher, that does not mean people will not lease your space. You will need to sell them on why they should rent your space and not the other location, without over stating your features. Some things that might be overlooked as amenities, include double paned windows, which help reduce utility bills, extra large rooms, and insulated walls that help muffle noise. Other things like exercise facilities, swimming pools, and inclusive deals that cover water and electricity may be apart of your rental rate. Be sure to weigh your benefits against the competitions before deciding to raise the rent.
Once you determine that a rental raise is necessary based on the current market, take the least invasive route to implement it. Applying the rent hike to new tenants and long-term customers will usually work better compared to raising it for short term customers, who you know are going to move out in one or two months. New tenants are not aware that their rate may be higher and long-term customers typically understand the need for fluctuations in rent based on inflation. Existing long-term customers should have their rental increases kept to a minimum and be spread out over a period of time, if possible. Implementing one large single rent increase is more likely to scare off existing customers. It is best to slowly increase the rate in six-month increments. You can include the gradual increase within the renewal lease. It is inevitable that you may loose a few tenants in the process, but the goal here is to look at the larger picture and be sure that the majority of tenants are satisfied. The ones, who do move out, can be replaced with new tenants, who will be more willing to pay the new amount.
There is another factor to consider, when scanning the market to see if a rent increase is appropriate. Let's say you have surveyed the current market and your rates seem to be in line with the competition. This means you cannot raise the rent, right? Not necessarily. There is still opportunity to increase your property's revenue based on unit size vs. demand. For example, if your rental statistics indicate that more customers prefer larger size units compared to smaller sized ones (or vice versa), then you can raise the rent on the units that are in higher demand. You can maximize your profits on these units, while staying within market boundaries on the remaining units. Remember, having the lowest rates in town may draw in a lot of customers, but may not always be good for your business. Rental increases are a fact of life, but the way your tenants respond to such a thing depends upon how you go about implementing the increase. Your plan of action will require you to do your research, and then sell the benefits of your property to existing and potential tenants.
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