All landlords share a similar fear about upsetting a loyal tenant by asking for a rent increase when it comes time to renew their lease. However, rising real estate costs may soon reduce your investment returns, giving you the need to boost your income.
Whether or not you should raise your Middlesex property’s monthly rent depends on a number of factors, including local market prices, vacancy rates, and whether or not your tenant is able to pay more. Prior to informing your tenant of a rent increase, it’s important to consider these things, especially if the tenant may find them difficult to accept.
Here are some steps on how to demand rent in your Middlesex property.
Check local rental laws
Knowing your local rental laws is a sensible move before you decide to increase the rent when renewing a lease. State and local laws on rent increases differ; some places prohibit rent increases, while other cities have rental ceilings that prevent landlords from raising rents above a specific percentage or cash amount.
Determine how much you can increase
The market value of similar apartments in the area can be used to determine how much to ask in a rent increase. Make a list of the rent values for available apartments in your area and use that number to calculate your new monthly cost.
Next, think about vacancy rates. Do you see a lot of vacant apartments nearby that are like yours? Do you have any difficulty finding new tenants for your other properties? Or is your rental in a location that is in constantly in high demand? You can decide if it’s worthwhile or not to increase the rent by knowing whether your tenant can easily find another place.
It’s also important to remember that just because comparable rentals in your neighborhood are renting for a certain amount, it doesn’t necessarily follow that you may raise the rent significantly to close the gap. While you can significantly raise the rent when you’re looking for new tenants, no existing tenant will agree to a significant rate increase.
A typical increase in rent would be between 3% and 5%, although this will depend on your circumstances, the rental laws in your area, and the current rent.
Make upgrades to the property
You might have a good reason to raise your rent to reflect improvements you made to your rental property. On the other hand, you definitely don’t have much of a case for a rent increase if you’ve disregarded requests from your tenants for repairs and maintenance.
By replacing some outdated appliances or making other improvements to the property, you can boost the incentive for them to stay. Similarly, it’s likely that your tenants will request certain improvements before agreeing to a lease renewal and rent increase.
Notify your tenants
Once you’ve determined the new rent amount, it’s time to inform your tenants. This needs to be done 45 to 60 days before the end of the lease.
The best case scenario for a landlord is to effectively increase the rent while maintaining a good relationship with their tenants, so you should have an idea of what you’re willing to compromise in order to keep your tenant happy with the increase. Such concessions can include repainting the apartment, replacing old appliances, providing free parking, or making other less expensive adjustments.
Once you’ve reached an agreement on the rent increase, make sure to provide your tenants a “rent increase notice” that is signed, dated, and kept for your own records. This is a good practice to do before renewing any lease.
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