Are you looking for growth in your property revenue but don’t know where to start?
Well, one answer here is to increase the rent.
But how much and when?
If you are stuck with these questions, don’t worry. We are here with this guide to answer all your questions related to increasing the rent and things to consider while thinking how much should I charge for rent.
So read on to have a look at what factors contribute to increasing the rent and how to do this process smoothly without getting involved in any legal issues.
Factors to Consider While Increasing the Rent
Thinking of increasing the rent can be far easier than actually implementing the process. Since you are not alone in this task, you have to build a good rapport and maintain regular conversations with your tenants.
But, the task is more than communication. There are a range of internal and external factors that the landlord must bear in mind while raising the rent.
So, let’s study and navigate these factors in detail to have an overview before raising the rent.
Inflation
Inflation, in a general sense, means an increase in the prices, and with it, rent is no exception. The property owners consider this as their legitimate right to increase the rental prices with inflation. No wonder that the income that comes in helps in keeping pace with the rising prices of goods.
Furthermore, the housing stock remains low, and the economy is able to support higher prices during the inflation. When the stock remains low, the rates become higher, which makes only the rare and few able to afford the houses that are available in the market.
Surge in Interest Rates
The pressure on the interest rates is yet another primary reason to revisit your decision of how much should I charge for rent. If the interest rates go higher, it is certain that you as a landlord have to charge the rent which is at the upper side of the cost. So, charging the rental amount also depends on what are the current interest rates.
In addition to the higher borrowing cost, the overall lifestyle and cost of living go up, which leaves no room for the landlords. They are compelled to pressure the renters to pay higher rent prices to afford the other additional expenses.
Local Rental Trends
When you are in the landlord business, aligning with the local market trends and keeping a pulse of all the market demand is equally essential. As you know, maintaining a balance between the housing supply and demand is one of the vital determinants of setting the rent price. The relative shortage of rental properties can aid in increasing the prices.
On the contrary, an oversupply will result in a rent deduction. Above all, the regional variations can also pose a major factor in the surging rental prices. For instance, if we talk of the metro and urban charms, the renters are more attracted to homes that are in close vicinity rather than looking for countryside or rural housing. This ultimately leads to an increase in the demand for houses and hence increase in the rent prices.
Utilizing Technology
With the advancements in technology, it has become easier for landlords to manage their properties and communicate with tenants. Utilizing technology can also help increase rental revenue through features such as online rent payments and automated reminders for late fees.
Additionally, landlords can utilize software that tracks market trends and provides information on current rent rates in the area. This allows landlords to set competitive prices while still maximizing their revenue. Being a digital landlord can also attract younger tenants who prefer modern solutions for rent management. Just make sure to carefully consider any additional costs associated with technology before implementing it into your rental process.
Rise in the Property Taxes with Hefty Insurance
The post-pandemic period has led to a significant change in the market and the industries. The residential rental market trends shaped by the pandemic need to be evaluated thoroughly to have a sneak peek at the whys and hows of an increase in rent.
Now, if we talk of the rise in property taxes and high insurance, yes, this can directly impact the rental process as the landlords ultimately aim to maintain a profitable position in the competitive market.
As you already know, supply and demand dynamics play a crucial role in setting market prices. Hence, if the landlords face a higher cost, they might wish to offset these expenses by increasing the rent price.
Renovating and Improving the Property
Renovation and certain improvements make you pay a bit over the odds. However, a desirable property after improvements will result in an overall increase in value, which will attract buyers in return.
The modern amenities offered with the well-maintained and updated property will attract quality buyers who will not compromise on the price if they deem the location to be perfect. This will lead to higher tenant satisfaction, which potentially results in longer lease terms. But again, the conditions are based on general trends, and there may be different scenarios with different locations and improvements.
Final Thoughts
Raising rent can be a complicated process, but you can make this process plain and straightforward with your efforts and compliance with the laws and lease agreement. The process of charging and raising the rent in no case should be a sudden surprise for the tenants.
Make the terms clear in the lease and provide an advance notice with prior communication.
Hence, you will be in a strong and secure position to justify your move to increase rent by following the factors given above.
