Every year, landlords need to consider the pros and cons of raising the rent on our tenants. Sometimes it’s clear. If they paid late or were difficult, we raise the rent. But many of our tenants are amazing, so it’s a difficult decision. Do we risk losing a great tenant by raising the rent?
Here are three important considerations when deciding whether to raise the rent.
1. Is your rental at market value?
On the Big Island, rentals are hard to come by, and rents are high. However, rents are high because of all the costs associated with renting out your home. There are property taxes, insurance costs, landscaping, and repairs and maintenance.
Landlords all know that finding new tenants is never a fun process. However, if you haven’t raised the rent in a while, chances are the market value has increased. Is your rental way below other comps in the area? You have a few choices for learning the market value.
There are rising costs with any rental property. Taxes go up. Insurance premiums may increase. Upcoming maintenance needs might be expensive. Here on the Big Island, you may need to take action against invasive pests, such as termites. Take all these things into consideration before renewing a lease at the same rent.
If you are making a profit and have a great tenant, it is probably best to leave the rest as if. However, you should not lose money on your own rental, so if you are not making a profit, it is best to raise the rent.
3. Are you able to raise the rent without losing your great tenant?
It is a delicate process to raise the rent. Some things to consider are trying to keep it under comparables in the area to still give your tenant a benefit. Provide at least 45 days notice, a law here in Hawaii. The most notice you can give, the better. Be kind in your communications, and let your renter know of your rising costs and that it is not just an arbitrary rent increase just for the sake of getting more money out of the renter.
There are times when rent increases are inevitable, but if you can do it the right way, you can likely keep your great tenant.