Lease renewals should ultimately be managed by your professional Columbus property manager, who knows the market trends and can compare rents on a regular basis to ensure you are getting the value you should for your property.
An increase in rent is based on the market and should be at least three percent of the current rent. At Solutions for Real Estate, we work on behalf of owners to secure longer leases, build relationships with the tenant, and create an opportunity for maximum income for the owner.
Reasons for Increasing Rent
Over time, inflation occurs and housing prices fluctuate. It’s important to stay current on what price to charge the tenant to maximize your cash flow and ensure your rent matches what the house is actually worth based on the market. Otherwise, you could be missing out on some extra money on every lease. Or, you could be charging an improper amount for the rent.
You might raise your rent for other reasons, such as an improving surrounding area, a higher demand, or because you’ve made some renovations to the property. The property’s worth will change over time.
Communicating the Increase to Tenants
An offer of an increase should really be used as an attempt to start a conversation with your tenant. Ultimately, the goal is to get the tenant to stay. Charging an excessive amount for no reason will result in a lost tenant and may even prevent future tenants from working with you. You must conduct market research to ensure that the price is correct. The offer should be presented 90 days prior to lease expiration in order to give the tenant and the office plenty of time to discuss all options that are available.
Increasing the Rent Effectively
Some increase in rent is better than none, even if it’s just $10. Higher rental increases might be more negotiable if a small incentive is offered such as blind replacement, touch-up paint, or a carpet cleaning. These items keep your asset in excellent shape and justify an increase. It allows the tenant to view the increase as the result of an investment, not as profit for the owner.
Should a tenant decide not to renew the lease, you should continue trying to negotiate a renewal when you receive the Notice to Vacate. You could also charge month-to-month fees for any holdovers. At Solutions for Real Estate, we charge a 10 percent fee when tenants need to stay longer than the lease period but choose not to renew. We have been successful getting rental increases of up to $200 per month, and we believe that an increase in any amount is important at renewal time.
Ensuring a Proper Increase
Make sure that renewals are consistently being worked 120 days in advance, so that the tenant has enough time to consider the increase and can adapt to the change. Ensure that timely offers are presented to the owner and the tenant, so they may both process the increase and its implications.
Your property management company should be getting the most income out of your asset. We’d be happy to help. When you’re ready to raise your rent, contact us at Solutions for Real Estate.