How to Raise Rent on a Rental Property

Rental property owners may need to raise rents for a number of reasons. This may include increased costs of living, major maintenance expenses, income shortfalls from other sources and anything else that may strain the landlord's finances. However, landlords can't just increase rents on a whim. If you own a rental property, there are a number of steps you will have to take in order to ensure that the rent increase complies with existing contracts and local, state and federal laws.

Determining the Rent Increase

When you decide to raise rent on your rental property, you will need to figure out just how much you should raise it. As a rule of thumb, your rents should not be significantly larger then the rents on similar types of properties in the local neighborhood. Otherwise, you will have trouble attracting tenants and keeping the existing ones. You can find out the typical rents for your type of rental property using local real estate guides and real estate advertisements.

Taking Care of the Legal Matters

Before you set out to raise rents on your property, there are several legal matters that you will need to check. First and foremost, you must check your tenants' leases. This is especially important if you are a new landlord who took the ownership of somebody else's random property. If any of your tenants have clauses in their leases that prohibit you from raising rents for the duration of the lease, you will have to leave their rents as they are until their leases expire. You should be especially careful with residents with long-term leases and residents with leases that are arranged through government-run affordable housing programs.

If none of your tenants have anything in their leases that would prevent you from raising rents, you should check for any rent control laws in your area. Some neighborhoods, cities and states may put caps on rents based on certain geographic and economic factors, You can find out about such laws by contacting a real estate attorney or the local housing authority.

Increasing Rents

Once the legal matters are taken care of, you can proceed with increasing rents. You will have to notify your tenants ahead of time, and you will have to do it in writing. Just how far ahead of time you have to notify your tenants depends on local and state laws, but it is usually no less then 30 days. The notice should include the value of the new rent and the date on which it goes into effect.

Getting Your Tenants Involved

Many landlords try to negotiate rent increases with their tenants. Explain why you need to increase rents, ask them for ideas and try to hammer out a compromise. For example, you and your tenants may agree to a gradual rent increase that would give your tenants more time to adjust. This isn't something that you have to do, but it will earn you some good will and help ease transition to higher rents. However, when you negotiate, be sure to include all tenants on your property—otherwise, you may be accused of favoritism.