Do you want to know when should you increase rent and how can you pull it off smoothly?
You’re in the right place.
We’ve put together a series of rent increase tips so that you can effectively raise your rental prices in a legal and fair manner. Let’s get right into the first point.
Tip #1 Engage a property manager about local rent ordinances
Rent increases are governed by legislation such as the Federal Fair Housing Act. These laws act as rent regulations and serve to broker this sensitive issue between tenants and landlords.
In Colorado, no county or municipality has the right to detract from established state housing legislation and establish their own laws. This means you can’t just increase the rent as you like or you risk getting into legal trouble.
Your safest course of action is to first talk to a property expert such as a property manager in order to learn more about Colorado’s rental laws.
Tip #2 Provide Sufficient Notice Time
Prior to going ahead with a rental price adjustment, you’ll also need to give your tenants sufficient notice.
Generally, rental increases of 10% and lower warrant 30-days’ notice. Increases of more than 10% necessitate a 60-day notice. If the tenancy is a month-to-month arrangement, then 7-days notice is sufficient.
Tip #3 Increase Rent According to Local Trends
What basis can you use to justify your rent increase?
Rent increase is more of an art than actual science. Having a property manager on board your investment journey allows you to follow up and ask other rent-related questions such as: What percentage can you increase rent by and how often can you up your rent?
To answer, the average rent increase hovers around 3% per annum but this isn’t fixed and neither is it uniform across states. Colorado legislation does not implicitly state how often rent may be increased, but the standard practice of once per 12-month period is deemed fair.
By studying rent trends in your property’s zip code you’ll be able to obtain a good average of what local units are charging. This coupled with the condition of your own property will guide you as to how much you should increase by.
Tip #4 Do You Risk High Turnover?
Increasing rent can also have disastrous consequences if not done right. One of the downsides to rent increase is a potentially high turnover.
Are there a lot of properties sitting empty on the market in your locale? Is there evidence to suggest that rent increase contributed to the high turnovers in these units?
Good property management isn’t just about making money. It’s also about establishing mutually beneficial relationships with your tenants so they want to stay longer.
Tip #5 Settle on a Fair Rent Increase
Being on good terms with tenants is key to success as a landlord. However, we cannot overlook the need to be realistic. There are bills to pay – insurance, mortgage, maintenance, property tax, repairs, and utilities.
When you increase the rent it should be in such a way that it enables you to take care of the property while also being able to secure a decent return as well.
Hire a qualified property manager today
Rent increase is inevitable because property expenses fluctuate yearly. Still, there are ways to navigate this tricky subject with tenants.
By ensuring that you follow Fair Housing laws, you communicate openly with tenants and seek counsel from qualified property managers you position yourself well when it comes time to raise the rent.
We hope these rent increase tips have been helpful. If you would like to discuss the topic of property management in greater depth don’t hesitate to contact our seasoned property managers at PMI Front Range Colorado.
Contact our PMI Front Range Colorado agents for more information.