Many landlords and tenants have agreed to rent reductions or deferrals during the pandemic, but what happens when the lease term is up or the situation improves? How do you prepare for rent increase or renewal after a rent reduction period? Here are some tips to help you navigate this tricky process and maintain a positive relationship with your tenants.
Before you propose any rent increase or renewal, you need to do your homework and research the current market conditions. Compare your property with similar units in the area and see how much they are charging and how fast they are filling up. You also need to consider the demand and supply of rental properties, the vacancy rate, the inflation rate, and any local regulations or laws that affect rent increases. This will help you determine a fair and realistic rent amount that reflects the value of your property and the market situation.
Secret shopping is the best way to find out customer service and safety of a community . Touring local area communities (COMPS) take into consideration the property age, size, cleanliness, programs as well as amenities. Also, security is a number one question and concern everyone asks while making the decision of finding a knew home. That being said local police reports are public record check them every morning to see if a current resident may have been charged with a crime that would be considered a lease violation. Documentation is key!
Communication is key to avoid misunderstandings and conflicts with your tenants. You should inform them well in advance of your intention to increase the rent or renew the lease, and explain the reasons behind your decision. You should also listen to their feedback and concerns, and be open to negotiation if they have a valid case. For example, if they have been reliable and respectful tenants, or if they have faced financial hardship due to the pandemic, you may want to offer them some flexibility or incentives to keep them happy and loyal. You should also document all your communication and agreements in writing, and update the lease contract accordingly.
In my experience- Before making that call to a tenant for a rent increase. Appreciation to the tenant for being a valuable customer for the amount of years they have been living in that property. Ask if there are any maintenance issues you should be made aware off. If there’s any? Apologies and ensure that you will take responsibility in seeing those issues are rectified accordingly. Start with , unfortunately we have carried out Market Research for that area, at the moment the valued price is at this amount ￡￡￡ , Unfortunately the Lord had instructed the full market value for that property As a valued tenant instead of the full market value of rental we’re considering only increasing the rate at a discounted value.
Depending on where your property is located, there may be specific rules and regulations that govern rent increases and renewals. For example, some states or cities have rent control laws that limit how much and how often you can raise the rent, or require you to provide a certain notice period or justification for the increase. Some also have eviction moratoriums or protections for tenants who are affected by the pandemic. You should familiarize yourself with these rules and regulations, and comply with them to avoid legal trouble or penalties. You should also consult a lawyer or a property manager if you have any doubts or questions.
Even if you have the right and the need to increase the rent or renew the lease, you should not be greedy or unreasonable. You should respect your tenants as valuable customers and partners, and treat them fairly and professionally. You should also be prepared to compromise or adjust your expectations if the market or the tenant situation changes. Remember that keeping a good tenant is often more profitable and less hassle than finding a new one, especially in a competitive or uncertain market. By being reasonable and respectful, you can maintain a positive and long-term relationship with your tenants, and avoid disputes or vacancies.
Another factor that you should consider when preparing for rent increase or renewal is your own expenses and income as a landlord. You should review your operating costs, such as maintenance, repairs, taxes, insurance, utilities, and property management fees, and see how they have changed over time. You should also review your income sources, such as rent payments, security deposits, late fees, and other charges, and see how they have been affected by the pandemic or the rent reduction. This will help you evaluate your cash flow and profitability, and decide how much rent increase or renewal you can afford or need.
Finally, you should plan for the future and anticipate any potential challenges or opportunities that may arise. You should have a contingency plan in case your tenants refuse to pay the increased rent or renew the lease, or if they move out unexpectedly. You should also have a marketing strategy to attract new tenants or retain existing ones, such as offering discounts, referrals, upgrades, or amenities. You should also monitor the market trends and forecasts, and adjust your rent amount or lease terms accordingly. By planning for the future, you can be prepared for any changes and optimize your property management .
Consider the current state of the property. Is the property meeting it’s NOI, is the property properly within standards for your target demographics, and lastly consider numbers ( renewal %, new lease pricing and occupancy). Once all Things considered you should aggressively seek to increase rents, this does not mean you should loose a bunch of tenants but you deal with the tenant on a case by case instance. You may have to sit with some and explain what’s going on, you may have to meet some halfway but overall when a property is not properly performing this could result in a property facing financial setbacks. Driving revenue to meet the expectations of your clientele and underwriting goals are paramount. You must try!