As the southern California economy improves, housing prices and rental rates are on the rise. The National Association of Realtors has already predicted a leap in rental prices by 4.3 percent in 2014. As your own operational costs, taxes and overhead go up, you’ll be forced to raise the rent. Unfortunately, there is risk of a lower renter retention rate when your rates make the climb, but if you do it right, you can raise the rent and not sacrifice keeping renters.
When you make the decision to raise the rent, tell your renters why you’re raising the rent. 100 percent transparency goes a long way with renters. If you’re open and honest, renters can understand the need for a change and be more accepting than if you aren’t clear on why the rental rates are going up. You can mention costs that have gone up and how their rise has impacted your ability to operate. Be clear that you don’t want to raise the rent to make more money, and state the economic changes are forcing you to increase it.
Inform Right Away
Don’t wait until the last minute to tell your renters the rates have gone up. Most states require a minimum of 30 days to inform renters, but you can be courteous and offer even more notice (if you have it available). You can only increase rent on new lease and renewed leases, unless your documents specify that increased rates are allowed mid-lease. Tell tenants with leases about to expire about the change and give them at least 30 days so that they can decide whether or not they will renew. If you tell residents last minute they might move because they feel as though they were deceived.
Be Flexible to Renters
If you have a strong track record and your renters trust you, you might make it through a rental increase just fine. Listen to the renters who come to you and cannot afford the higher rent. There may be instances where you can afford to negotiate a slightly lower rate for those who have been long-term tenants. Remember that having long-term tenants can be more profitable than a high turnover rate in your units.
When you show that you understand what your renters are going through, especially during a rental increase, you are more likely to keep your tenants than if you don’t. Remember that managing a property means you still have to show your human side and show that you’re compassionate about what your renters are going through. Offer a budgeting class, incentives, and discounts to renters who chose to renew their lease even with a higher rate as a “thank you” for sticking it out.