Dear Monty: I bought a six-unit apartment building recently. How can I soften the blow to the tenants when I raise their rent?
Conduct Basic ResearchResearch will provide new knowledge to gain confidence in your decisions. Your objective is to learn how the rental market for similar properties is performing in your neighborhood. Many cities may have planning departments or housing authorities with good information. There are also private companies that sell data. Enter “find housing rental data” to see many sources appear on your computer screen. You can also do it yourself by tracking rental activity. There are many tools for landlords and tenants online. Here are two examples I found in my search: https://www.rentometer.com/ for tenants and https://www.mysmartmove.com for landlords.
Action StepsNo. 1: You have a relatively small project. Ask each tenant to meet with you to get acquainted and learn how they like living there, what they like and don’t like, and what improvements they would like to see. Also, ask how long they expect to live there. Let them know upfront that you may not be able to do everything.
No. 2: When you raise the rent, share the data that justifies the increase. Real estate taxes, insurance premiums and maintenance cost increases are examples. If a similar apartment anywhere else is $50 higher, and you ask for $25, it gives them a reason to stay. Some landlords build increases right into the lease.
No. 3: Not all tenants are created equal. You are under no obligation to implement across-the-board increases. If five tenants complain about the sixth tenant, consider raising that tenant’s rental rate above the market rate or not renewing their lease. If an apartment is well-kept or neglected, consider that circumstance in the increase. Consider incentivizing the long-term tenant with a softer increase. Check your lease agreement and local and state law to ensure you conform to the amount of notice time.
Add Value To The PropertyIt is possible to negotiate a higher rent by making improvements important to the tenant. Do the math, judge the tenant’s reaction and then decide your course of action. Soften the blow by adding value, and some tenants may stay.
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