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Rent costs keep rising, rising, rising. Whether it’s apartments or STRs, we see headlines everywhere about the exorbitant cost of rent.
Small real estate investors have to strike a balance. they were torn apart Raising rent amounts to cope with inflation, high house prices, tax and rental demands, and strains on sustainability. After all, without a reasonable rental experience, higher rental prices may prompt quality residents to look elsewhere.
Landlords are also coping with challenging economic times many residents are facingwhere the decision often comes down to paying rent or pay Other necessities. many landlords they themselves Facing a severe test Decide, also Postponing upgrades and repairs, and postponing more maintenance to account for past due and uncollected rent.
The pressure investors feel coming From both sides. On the one hand, the desire to keep pace with local rent levels is part of the calculation we use to measure investment success. On the other hand, there is a need to keep the property occupied and generate income. How do we balance the two to achieve the best balance we seek as investors?
6 Guidelines for Raising Your Rent Ethically
Raising rental rates is part of the industry. this is unavoidable. Whether you’re an independent investor or looking for compassionate, effective property management, here’s how to respectfully raise your rent and retain your property is occupied and produce income.
1. Start with respect
When you started reading this article, maybe you noticed the word “resident.” been used intentionally. The word evokes ideas of ownership, long-term residence and respect.
It is very different from the word “tenant”. Tenants evoke short-term, dime-a-dozen, anything anyone would do, and really a “we’re not on the same level” relationship.
If you want your property to last longer, At the highest possible rent, A good starting point is How you use these properties on a daily basis.
Residents not only occupy your property and provide a deterrent to vandalism and theft, but they also provide income with which we pay our bills, reducing the principal of the money we borrow. a resident supply this income Paying for vacancies and maintenance is a frontline defense in mitigating minor problems and preventing them from becoming serious question.
From the moment you show your property to your residents, the way you treat them will impact the quality of their residents. The better the relationship you have with residents, the higher the likelihood That them Stay for many years and be willing to pay intermittent rent increases.
2. Provide residents with adequate Notice
Budgets are tight these days. The old 30% rent rule does not apply to most renting households. Many people spend 40% or more on housing!
this This is why investors must be cautious and strategic when raising prices. You do not want No Increase price only To retain residents – it’s not worth it if it causes your investment to stop being profitable – but you need to do it with compassion and respect. Part of that means giving adequate notice.
You do not want cheat When your residents’ leases expire. As soon as you know about a rent increase, discuss it with your residents. They need time to see if it’s within their budget without worrying about moving out quickly. At REI Nation, we start work six months in advance and recommend at least three months of lead time.
3. Make it evidence-based rather than casual
You should be prepared if your residents ask about the reasons behind price increases give one. Are you considering market rent in the area? Will tax increases mean costs to you? more? Will residents benefit more from management or needed improvements and amenities?
in spite of, you should have There are good reasons to increase rent other than a personal desire to make more money. If you can provide evidence that you can increase your rent by an amount or percentage above your actual amount Increase For them, this could go a long way in alleviating resident resistance. No one expects rents to rise, but keeping rents just below reasonable levels could mitigate headwinds.
4. Leave space negotiation
When you provide residents with choices, they feel respected. They should be able to accept, reject, move out, or negotiate a price increase.
Be open to reaching a deal. them May be willing to sign a long-term lease to gradually increase the price. You have to weigh whether guaranteed occupancy is balanced against the cost of finding a new tenant over a typical lease term.
5. Make it a conversation, not a Require
Ultimately, The best thing you can do is respect your residents enough to communicate. Be honest and open with them. Discuss it carefully and listen to their thoughts and feelings.
Remember, this is not a typical business relationship. Your clients (residents) rely on you to provide assistance with their homes. It’s not just their property.
We have heard from too many residents who have had their property unexpectedly sold or rent increased Unconsciously. This is stressful and unfair, especially for Those are Good property steward.
all these are people. you are in a People’s business. So treat them with the same compassion and grace that you would wish to be shown. If you are working with a property manager, make sure they are on the same page. A rational boss doesn’t do much good if management rules with an iron fist!
6. Start with small things
Gradually raising prices is Easier Swallowing is bigger than jumping. A one-time increase of 5% or more is likely to result in turnover. It’s not the end of the world, but it’s something you want to avoid if you have outstanding residents.
Anyway, a smooth, upward curve foreseeable Usually better than unpredictable changes. As mentioned earlier, residents typically agree to sign multi-year agreements with built-in incremental price changes.
bottom line
Ultimately, investors shouldn’t be afraid of “evicting” residents. Sometimes prices have to rise to keep up with the market or other growing expenses. How you do it will determine how people respond.
Talk to your property manager about raising the rent, discuss and negotiate terms. Even if you are not directly involved in the process, you want to be on the same page and informed.
This article is provided by REI Nation
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Notes on BiggerPockets: These are the opinions written by the author and do not necessarily represent the views of BiggerPockets.
