Raise the rent without losing your tenant

Raise the rent without losing your tenant

A common question in Property Management, particularly in relation to longer term tenancies, is when to increase the rent and by how much? The key is to set the rent at a level that ensures the investor is achieving the highest possible income for their asset but not so high that tenancy take up is adversely affected. 

Increasing rent is a sensitive issue to a degree. The fact is, no tenant welcomes a rental increase, it generally leads to frustration and even potential vacancy if it is improperly managed and enacted. Getting it wrong may lead to losing a great tenant, a vacancy period of up to 3 weeks (or more in some cases), not to mention the added cost of another letting fee. 

It is also important to know where you stand in regard to regulatory stipulations and follow a process that maintains a great relationship with your tenant. It is common practice to review the rental level each time the lease is renewed with legislation stipulating that increases can only be implemented once per year. The rental market is always on the incline, therefore it only goes to reason that the investor should increase rent in line with natural increases in the market. But then again, the question remains - is it worth losing a tenant over?

The best recommendation is to increase the rent moderately. A large jump in rent will leave your tenant feeling frustrated and they may not be able to support a significant increase. Generally a $5 or $10 increase every 12 months will help to maintain market level rent and most importantly - retain your tenants. It is also recommended to discuss the upcoming increase with the tenant before sending a written notice so they don’t feel the increase has come out of the blue. As a tip - when planning to increase the rent always ensure any maintenance issues have been attended to prior. You don’t want to be on the defense or answering questions of whether the increase is in fact justified. 

Legislation requires the landlord to provide 60 days written notice of implementing a rent increase to the tenant and argues that the increase must be in line with current market rates. An unjustified or excessive increase provides an opportunity of disputing the increase with the Tenancy Commissioner. It is therefore wise to complete a rental assessment before raising the rent to prove the increase is justified.

On a separate topic, I do believe when you are trying to sell your investment property, it's not a smart move to increase the rent. Often landlords will decrease the rent by a small amount as a ‘thank you’ to the tenants for being cooperative and maintaining the home in an excellent condition for inspections. If you are heading down this track it may also pay to request a written rental appraisal for your property which provides assurance to prospective buyers of the current rental yield. 

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