At Ali Safavi Real Estate we know nothing polarizes a landlord and their tenant more than rent hikes. A renter never wants it and landlords are always trying to deciding when to implement it. If you’re dealing with bad tenants the stress is much less, because who cares if they decide to leave? Good renters, however, can be hard to find. It doesn’t mean you forgo keeping your rent at market value. Instead, try to be a bit more strategic about how you communicate the upcoming hike.
One tip that reaches across the entire landlording spectrum is friendliness. Taking a few minutes now and again to invest in the personal life of your tenant can go a long way. You don’t have to be besties, but asking about their life and family can make the relationship feel less buttoned up. If they only hear from you during problems or money issues, it’s reasonable to think the tenant will start associating your voice with bad things -which does nobody any good. Having a friendly relationship humanizes the landlord, in turn making tenants less resistant to change.
Second, keep your increases low. A 3% raise may be annoying for your tenant, but it probably won’t break the bank. Once you get in the 8% range you may start forcing people out of your units. The money hungry among us may think, “Who cares, the next tenant will just pay more.” Yes, however that next tenant may be a nightmare. Also, the cost of turning over a unit can often carry a hefty price tag that is worth avoiding.
Giving written notice before a hike is the law, with the amount of time varying from state to state. However, don’t just do the bare minimum. Give your tenant as much time as possible to prepare for the hike. You may also want to give them a courtesy call. Again, this humanizes the process.
If the tenant pushes back on the increase you have a couple options. It really depends on how much you want to keep the tenant. One popular tactic is to negotiate a lower increase and lock it in if the renter agrees on a longer lease period – typically 2-3 years.
It also helps to make one or two big improvements to the unit during the year. New paint, new appliances, floors, etc. This gives you something to point to as efforts to improve the quality of living. If no improvements are ever made, the renter may begin to think, “What am I getting out of this rent hike?”
Overall, try and be consistent. If you increase rent one year but hold off the next it gives conflicting messages to the tenants. They don’t know what to expect. There may be some awkwardness, but this is a business. Like any good business owner, the bottom line must be adhered to. Just don’t be a dick about it.