How and Why to Raise the Rent

Raising the rent probably seems like a great idea if you want to make more money from your North County San Diego investment properties. However, landlords should never raise rent arbitrarily or without proper research to support a rate increase. 

Maintaining a good relationship with your tenants is one of the most important parts of being an excellent landlord. If you have a reputation for increasing rent prices, you'll lose good tenants. 

A significant rent increase can send your tenants packing. Vacancies are more expensive than taking a thoughtful, slower approach to rent increases. It's critical to be strategic about how and when you raise the rent if necessary to keep your rental properties profitable. 

Why You Should Raise the Rent

If you're losing money on a property, it's time to take a look at your rent price. 

There could be several reasons to justify a rate increase. From costlier expenses for maintaining the property to keeping up with market values for nearby properties, landlords can raise rent prices to help support changing circumstances. 

Higher taxes, increasing insurance costs, and inflation are all valid reasons to raise the rent. 

Your properties are a long-term investment. The rent price that was perfect five years ago might need an adjustment today.

The word "rent" with a red, upward-trending arrow above it

Why You Should NOT Raise the Rent

Avoid raising the rent for extraneous reasons. Don't pass along the costs of upgrades that aren't necessary. Be sure also to avoid raising the rent for personal reasons or expenses. 

  • Are you adding a pool to your North County San Diego property? Don't pass that cost on to your tenants. However, if the property value improves after the pool installation, you could justify a small rent increase for the next lease term. 
  • Did you replace the air-conditioner? Tenants don't need to pay for that. 
  • Are you planning a personal vacation this year? Your tenants don't need to pay for that, either. 

Raising the rent is a combination of common sense, making sure your properties are profitable, and maintaining good landlord-tenant relationships. 

Communication and Timing Matter

As a landlord, you don't need to provide proof to your tenant when raising the rent. However, it makes good business sense to communicate well when increasing the rent for a tenant. 

You'll also have better success keeping a tenant if you time a rate increase when it's time for their lease to renew. Stay within the rules of your lease agreements and follow landlord-tenant laws. 

  • Start 90 days out from their new lease term. Send a reminder at 60 days, then again at 30 days. 
  • Communicate both by phone and by email. 
  • Document each communication.
  • Be brief but clear. Let tenants know the date of their new lease and the amount of the increase for their next term. 

When you give a tenant plenty of notice about what to expect, you give them options. They can choose to stay and absorb the higher rent. Or, they have plenty of time to find a new home. 

If they choose to leave, you also have plenty of time to find new tenants who will move in at the higher rental rate. 

Think Small When Raising the Rent

If an increase helps keep your rental property relevant, profitable, and safe for tenants—without pricing it out of the market—you can make small rate increases to your rent price.

Start small. As a good rule of thumb, never raise the rent more than 2-4% each year or from one lease term to the next. A large jump in the rent communicates that you want to make more money rather than provide a safe, affordable home for loyal tenants. 

Keep your tenants happy. When you have quality tenants, protect that relationship. 

If you have good tenants who will sign a 24- or 36-month lease for a slight "discount" on the increase, offer those kinds of options. 

A man and a woman signing paperwork

You'll make more money long term with smaller increases to the rent over time while retaining excellent tenants. 

You Don't Have to Be the Bad Guy

If the idea of raising the rent scares you, you don't have to be the bad guy. 

Use a property management company to handle your rental prices. Professional property managers know how to set the right price for your properties. When it's time for a rate increase, they'll make recommendations based on market research and your property. 

Raintree Property Management will also handle all communication with your tenants about a rate increase. You won't have to deal with upset tenants or explain anything when it comes to a rent increase. 

Knowing the right rental rate starts with understanding how much your property is worth. Get a FREE Rental Analysis and make sure you're getting the most from your properties. Click the link below to get started.