Did you know that the country’s rent index increased this past year at an annualized rate of 3.6%?
That is a pretty significant increase. And, if you own a Howard County rental property, this valuable statistical information may cause you to consider a rent increase come lease renewal time—and rightfully so.
In all honesty, you are in the rental property business to garner as much positive cash flow as possible.
And if the market is going up, why not include yourself in the mix?
However, maintaining your rental property’s annual profits (or better yet increasing them), without experiencing any significant tenant loss is a delicate thing to balance. That’s why today we will share with you some things to consider before raising your Howard County rental property’s rent.
When to Raise Rent on Your Howard County Rentals
Raising the rent on your rental property involves a lot more than just a notice to your tenant that the price will increase come renewal time. In fact, many say it takes good business skills, in-depth marketing research, solid landlord/tenant relationships, and even legal knowledge when it comes to raising the rent on an investment property successfully.
Here are some of the biggest considerations to weigh before deciding to raise the rent on your quality Howard County tenants:
1. Assess the Current Rental Market
Sure, the Bureau of Labor and Statistics Report states that the rent index has risen over the past 12 months at a solid rate of 3.6%. However, that does not necessarily mean that a rent increase of that magnitude is a good idea for all regions that have rental properties—Howard County included.
Before jumping on the bandwagon and raising the rent on all of your tenants, you should research the current rental market in your area. Here are some things you should address in your research:
- How do your current rates compare to similar properties?
- Do your amenities justify an already-high rent amount, and would they support an additional increase?
- What is the demand for rentals in your area?
- What are the current vacancy rates in nearby rentals?
By answering questions such as these, you will get a true idea of the current rental market rate for rentals similar to your own. And, if your rental stacks up, there will be room for a rent increase.
2. Evaluate Current Tenants and Understand the Law
If your Howard County rental is currently occupied, you should thoroughly evaluate the tenant that resides there before justifying a rent increase. In addition, you must look carefully into your state laws regarding how much time is required to notify a tenant before a rent increase occurs in order to avoid any legal trouble.
Increasing your rental rates will net you more profit than anything else with your rental. However, sometimes the assurance of having a quality tenant that pays on time, causes zero trouble, and cares for your property as though it was their own, is enough of a reason not to raise the rent every chance you get. Consider things such as:
- The last time you raised the rent on each property and which tenants felt the increase
- How valuable your tenant is to your rental property business
- Whether you would be willing to lose such a tenant in the case they refuse to renew due to a rent increase
- Whether you would be willing to negotiate if your tenant contacts you about the increase
- What the legitimate reasons are for raising the rent that you can explain to existing tenants
If the lease agreement expiration for your Howard County rental is approaching, and you are serious about raising the rent upon a lease renewal, make sure to follow these important steps:
- Ensure the rent increase complies with Maryland law and you provide your current tenant proper notice.
- Make the notice official and in writing so that both you and your tenant understand that a rent increase will be in effect come lease renewal. Include information such as the current rent amount, the new lease amount, the actual increase amount, and a place for both you and the tenant to sign in agreement.
- Maintain a copy of the official notice for your records.
- Send the notice to your tenant via certified mail or hand deliver it to ensure proper delivery.
- Consider a courtesy reminder via email, letter, or phone to remind your tenant the lease renewal deadline is approaching.
3. Factor in the Surrounding Area
Is your rental property in a location that is experiencing a lot of growth? Are there new shopping markets, entertainment venues, school, and parks popping up? Are employment opportunities booming?
If the answer is “yes” to any of these questions, this is a good sign that you will be successful in raising your Howard County rental rates. Though you may lose your current tenant in the process, with such growth in the surrounding area, someone else is sure to want in on your property.
And, if you utilize Maryland’s best property management company, Bay Management Group, to help you advertise your new vacancy at its higher rate, you can trust your property will have great exposure, that all potential tenants will be thoroughly screened, and that only the highest quality tenants will be placed in your valuable property.
4. Take a Look at Your Overall Goals
Raising rent on a rental property is every property owner’s dream. Higher rents mean more money and more positive cash flow. However, sometimes increasing your rent rates brings unforeseen problems that you may not be prepared to deal with.
For example, there is always the risk that you raise the rent on a tenant that has been loyal to you for some time and decides that the increase is too much. While this opens your property up to new tenants that may be willing to pay the increased rent amount, there is no guarantee this will happen right away, even if the market, location, and economy states differently.
And the truth is, rent that is paid at a lower rent amount each month is more than rent that is not being paid due to vacancy. If you are not willing to risk losing a good thing, try holding off on a rent increase.
In the end, being a Howard County property owner can be difficult. Finding the balance between having a profitable rental property business and increasing your cash flow can be hard to do, especially if you do not think things through all the way.
Every property owner wants more money. However, it is wise to know that quality tenants can be hard to come by. You know—the ones that don’t have to be evicted, sued, babied, cleaned-up after, or chastised for breaking the rules. In addition, quality tenants pay their rent each month, without complaint, thus filling your pocketbook. Increase the rent and you may risk losing all of that.
If you are unsure as to whether you should increase your Howard County rental rates, talk to the most knowledgeable property management company in town – Bay Management Group. With expertise in all things property-related, including the current market trends, the legalities behind rent increases, and the likelihood of a successful rent increase, Bay Management Group can help you with this trying decision.
So, contact Bay Management Group today and see how we can help you with your Howard County property needs today to make sure you receive the highest monthly rate possible.