Raise the Rent?
Is it time to raise the rent? There are many people that are excited about attaining their own financial security as property owners. They often forget that the work still must continue. Being a landlord is not an easy job, and there are still a lot of logistics to consider. This involves tenants, meeting their needs, making sure that you aren’t getting taken advantage of, collecting rent, maintaining your property, and so on. While much of this work can be delegated, the truth is that it can still involve many complex negotiations and resolving personal issues between certain tenants. In fact, there are many people who end up leaving the property management industry because they find that it doesn’t match their personal life goals or objectives.
You may have come to a crossroads, where you believe that it’s time to raise the rent. There are cities that are growing significantly in all different parts of the world. This results in the demand for living spaces which often creates quite the market for property owners.
One example is the fact that Canada’s housing prices were raised dramatically thanks to international demand. This includes Vancouver homes being worth quadruple - and Toronto homes being worth triple - the prices that they were just several decades earlier. Either way, before you do raise the rent, consider the following.
Does It Make Sense?
The unfortunate truth is that there are many property owners and property managers that are set on a specific number. This number gets to the point where it prevents them from doing real business. You cannot be charging 50% more rent than competitors simply because you have sentimental value to the property, or because you feel as though it deserves that price. There have been many stories where Wall Street equity firms own the properties and begin demanding rent hikes out of nowhere. This is unethical.
You should do some research to make sure that a rent hike is appropriate. Are the neighbors hiking rents? Are home prices going up enough to warrant a rent hike? You should study your surroundings a bit before making a decision.
Is The Change Dramatic?
If you are too greedy with respect to your rent it might end up costing you your reputation. Your tenants likely understand that you want to profit off of your property. But don't dismiss that maintaining a property and all of the expenses and fees associated with it can be expensive.
You should try to put yourselves in the tenants’ shoes and make a decision based on empathy. Of course, you should also remember to follow all laws with respect to the amount of rent that you plan on hiking.
Announce It ASAP, Let Tenants Decide
If you were to suddenly declare that your tenants paying $1,000 a month have to pay $2500 next month; your tenants would be reasonably upset. The change would be so dramatic (150%), that they may not feel as though living in your property is an option. If a rent hike is in the cards, the least that you can do is be professional and compassionate.
You should be upfront about implementing a rent hike and allow the tenant at least three months to decide. In actuality, six months would be ideal, as there might even be tenants that have already decided to move-in that time.
Truth is, it's inevitable in the property management business to deal with a situation like this. You can find yourself in a tricky situation with your tenants, but sometimes these financial decisions have to be made. One of the main benefits of hiring a professional property manager is that you won't have to deal with these tough situations. Learn more about our property management solutions