When making the decision to raise the rent on your rental property, one should proceed with caution. If raising the rent too high, it can frustrate your tenants causing them to leave you with an empty property. Not raising it enough or at all can cause you to lose money on your investment. Here are some questions that should be considered before pulling the trigger
Tenants’ Other Options
- What is the probability that the tenants may choose to move if the rent is? Should the tenant move, are you prepared for the turnover costs. Turnovers include downtime creating a loss of revenue and this can quickly consume the pocketbook if not prepared
Affordability of the Market
- Is the rental rate approximately one-third of what the person’s monthly gross income of the area’s market? Once it gets beyond this point it may be getting too high and either cause the current tenant to fall behind or create longer than expected vacancies between tenants.
Know What Your Competitors are Charging
- Goes in hand with the previous considerations. Tenants are aware of what is on the current market and will start shopping around for a home that has more options, has been updated, or is less expensive.
- While larger areas tend to respond better to the rental needs by building more homes and apartments, this is not always the case for smaller areas such as Coos County. Do not assume that just because the rental market in the area is thin it will force a tenant to stay.
- Does your home still have the same paint as it did when you first bought it? What about the condition of the carpet or flooring? What about those pesky appliances, could they still be the originals? Take a moment and consider a few simple updates or even upgrades in the home to keep a tenant happy.
Going for the Maximum
- In 2018 Oregon enacted SB608 setting limits on rent increases. In short rent cannot exceed the amount of 7% plus the Consumer Price Index (CPI) for the West Coast (currently 2.2%) annually, unless exempt. Annual rent increases while staying competitive is healthy, and as we all know small batches is always an easier pill to swallow than a larger amount.
In summary, going for the larger increase straight out the chute may just be shooting yourself in the foot as well know how costly tenant turnover can be. However, giving a little to justify the increase will keep a tenant happy and just may save you those turn-over blues.
If we haven’t already spoken regarding your property’s rental rate, please reach out, I’d be more than happy to go over the options.