Rental increases can contribute to your regular income and your long-term ROI, but it’s important to be strategic when you’re raising the rent on your tenants. Make sure you do a market analysis so you know what similar properties are renting for, and remember that keeping a good tenant in place is far more profitable than a few extra dollars in rent every month.
Set the Right Rental Price
Before you think about raising rent, you have to start with the right rental price. Pricing your home too high will result in a longer and more expensive vacancy, and you’ll run the risk of attracting unqualified tenants who are desperate because they’re getting declined for other properties. If you offer a competitive price when you first put your home on the market, you’ll get great tenants who know they’re getting a good deal.
Raising Rent during Renewals
It’s common to increase your rent when a tenant renews the lease. Tenants will often expect this, and it is easy to justify. Your insurance expenses, taxes, and the costs of repairs will probably increase from year to year, and you’ll need to collect extra rent to offset this. Analyze the market before you raise your tenant’s rent. Find out what other homes are renting for, and see if there’s a lot of competition for tenants. If your tenants find out they can rent a similar home for a lot less money, they may be willing to move out of your property. The tenants will do their research; make sure you do yours, too.
Provide Enough Notice of Rental Increases
In your rental agreement, you should indicate how much notice your tenants will receive before the rent is increased. California law requires you to provide 30 days’ written notice to your tenants if you’re going to increase the rent. Send a letter or put something in writing when you’re offering your tenants a lease renewal.
Raising the rent is also appropriate if you’re offering additional services, such as lawn care or pool care. If you’d like to learn more about when you should and shouldn’t raise the rent, please contact us at EFS Property Management. We’d love to tell you more about managing properties in Los Angeles.