Property owners are allowed to increase the rent of their units each year but it is limited by a percentage fixed by the law. For 2015, the allowable rent increase is 2.5% for residential tenancies. However, the rent increase is more of a balancing act for property management and property owners, since they could end up with a loss if the increase has caused some vacancies to materialize. Here are some important points to consider, before you make a decision to hike rents in an economy that is nothing to write home about.
Assessing Tenants and the Market
Research has to be conducted in two areas, and property management will have to assess tenants' value and the state of existing rental market. In order to assess accurately consider the following points:
The last time rents were raised
Who are the valuable tenants and can you risk losing them
Can you consider excluding certain high-value tenants from the rent hike to avoid the risk of losing them
For the Rental Market
§ Review rental rates of similar properties and see how they match up with rent on your property
§ If your rates are higher than other, what features or amenities justify the high rate
§ Is the demand for your type of property higher than usual
§ Your current rate of vacancies
§ What type of units are more in demand, for instance smaller units compared to bigger ones, and should you consider hiking rent for only units with higher demand
Announcing the Increase in Rent
Obviously, nobody is going to be happy with an increase in rent, but the negative effect can be reduced largely by effective communication in a professional, clear, and polite manner. Use the official medium for announcing the hike, which is usually a printed notice on company's or property owner's letterhead. The language should be simple to understand, concise, and include some of the reasons for justifying the increase, so that number of complaints can be reduced before they occur.
Formulating a policy where you tie the increase to an indexed measurement would be an incredible and judicious idea, since that way you can avoid surprises and it can help tenants plan their budget accordingly. For instance, a consumer price index would be a magnificent point of reference to base the increase.
After the Announcement
After the increase in rent has been announced, be ready to respond to negative feedback and even outright anger and shock from tenants. Ready a list of legitimate justifications, which you feel were the main reasons behind the hike in rents. Some of the reasons that most tenants will understand them to be legitimate are higher costs of repairs and maintenance, expensive janitorial service, higher cost of utilities, and increased rates of property fees and taxes.
If you are planning to improve features and amenities for enhancing the living experience of tenants then make a point to mention it to them. However, first make sure, most tenants will value such improvements. There is not any point in increasing parking spaces for instance if everyone already has a spot to park and there are already enough extra spots available. Finally and moreover, if you have not raised the rent in a long time, point out the duration since the last increase in rent took place. But keep in mind that the economy has not improved in years so that date may not mean as much.