As an investor in rental real estate, it is likely that your ultimate goal is to ensure that you have enough money coming in to cover all of your expenses, as well as to set aside for emergencies…and profit! But as time goes on, how can you determine when it’s the right time to increase the rent amount, and by how much?
While many real estate investors simply raise their tenants’ rent when “the time feels right,” the reality is that isn’t necessarily the best strategy to use…and it could even result in driving your current tenants away.
Rather, a much better method for knowing when to raise the rent, and by how much, is to study the local rental market. For instance, the amount that you increase the rent should ideally be competitive with the rent rates for comparable properties in the local rental market.
You could also keep your rent raises on pace with the yearly change in the consumer price index. For instance, if the U.S. Bureau of Labor Statistics indicates that the index for shelter has increased over a given year by 3%, then you could multiply your current rent amount by the increased percentage in order to determine the new figure going forward.
As an example, if you are currently charging your tenants $1,000 per month, and the change in the CPI (consumer price index) is 3%, then multiply $1,000 by 3%, making your new monthly rent $1,030.
Oftentimes, tenants will want to know why the amount of their rent is going up. In this case, it is important to be truthful with them, and to provide them with good solid evidence as to why you are asking for a higher amount of rent going forward. These reasons could include inflation, rising insurance and / or utility costs, or a higher cost of property maintenance.
If the time you spend taking care of your rental properties is preventing you from doing other things, then it could be time to consider hiring a property manager. An experienced property management team can take over all of your landlording duties, including rent collection, tenant management, and property marketing and maintenance.
Want to learn more about how working in conjunction with a Central Florida property management company can benefit you? Just Contact Us today for all the details.