Although a tenant may not like a rent increase, as a landlord there are several reasons you might want to raise the rent. Follow all proper state and local notice requirements for increasing the rent, as some states require from a 30- to 60-day notice of a rent increase.
One primary reason to raise rent is to bring the rent up to market value. Market value is the rental price of other apartments in the area. A cursory look at the rental section of the newspaper or online will give you an idea of what other properties similar to yours are asking for in new rentals. If you find a small difference, such as $25 to $50 dollars, you can increase the rent the total amount. However, if there is a substantial difference, such as $100 to $200, you may want to increase the amount in increments, such as every six months, especially if you want to retain the renter.
If you improve the property, it can bring more value to the property, which in turn can lead to higher revenue in the form of a rent increase. Some improvements may include landscaping the grounds; refinishing a pool; or installing central air conditioning, new carpeting or a new roof. These improvements require an expenditure of funds, and the logical place to recoup the costs is through the property that is enhanced through the improvements.
Neighborhoods can change character and what was once an merely an acceptable neighborhood to live in can become the most desirable area of the city. If your property is located in a neighborhood that undergoes such a transition, it will bring the rents of the surrounding properties higher as everyone tries to move into the area. This will allow you to raise your rent in order to keep up with the new market price.
Several other factors can lead you to increase the rent. These include taxes, cost of living and maintenance. As property taxes rise and the cost of living increases, the value of your property should also rise. To keep your property at a level where the expenses are below the income, the rents should increase in small amounts tied into both. Maintaining the property can prevent large repair bills. The cost of annual maintenance should be reflected in the rent price and rise as maintenance costs do.
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