Oftentimes, landlords and property owners have a hard time knowing how much they should increase their property’s rent. Believe it or not, there are many things to consider before taking that huge step. Not only do you have to think about how much the increase is going to be – you also have to think about how this will affect your tenant and your property.
Still not sure on how you should increase your rent? Below are the vital things that you should remember when increasing your property’s rent. Grab your pen and paper and take notes.
1. Know the law
The Philippines has its own Tenancy Laws that every landlord and tenant should abide. The law states that the landlord that offers P 10,000 and below for rent, can only increase the rent of a residential unit by 7% once a year. Not abiding the law can get you into trouble so you better read up before you make that increase.
2. Why do you need the increase?
List down the reasons why you are increasing your rent. Here are the most common reasons why landlords take a hike on their rent:
- Cost of living: Of course, the landlord has to make a living, and sometimes the amount of rent that the tenant is giving is just not enough.
- Maintenance: Landlords make the increase in order to make improvements to their property.
- Taxes: An increase in government taxes may lead to an increase in rent.
3. Consider the current economy
Economy and real estate are inseparable. Are employment rates on rise? Are the prices of food and other needs on an all time low. If yes, it wouldn’t hurt if you make a tiny increase in your rent. If not, then an increase can be a bit too much for you tenant. You may face a few vacancies if your economy is bad.
4. Take a look at the fair market value
Do a little research in your neighborhood. Ask other landlords how much their current rent is, then make a comparison to your proposed increase. What if the other landlords’ rent is much smaller than what you are going to offer? Your property can become the most expensive property in the area and that won’t look good on future tenants. Your increase will be more justified when your renting price is much smaller than others.
5. Improvements in the area
Take note on the changes that are happening in your neighborhood. Is there a new mall around the corner? A new food hub? A new school? New developments hints that you are justified on increasing the amount of your renting price.
6. Inventory is a must
Calculate how much the appliances, utilities, and services cost. You should also consider the amount that it would take to repair the some of the damages in the property. You have no power to increase the pricing rent if some parts of your property are in turmoil.
7. Hear out the tenant
Before you make the increase, make sure that you already accomplished some of the requests that your tenants have been asking you for a long time. Some tenants will only agree with a rent increase when you already made the changes that they have been asking. Try improving the property, the services, and the benefits of the tenants. Groom the lawn, provide internet services, or re-paint the house. Do some much needed renovations. By improving the property, you are actually adding value to it, making the increase more plausible.
8. Re-read the agreement and the contract
You must take another look at your shared agreement with the tenant. Look for any stipulations that may hinder you from increasing the rent for a certain amount of time.
9. Remember to write notifications
Common landlord courtesy states that you should notify the tenant 90 days before the rent increase. In this time the tenant may have the opportunity to ask questions about the rent increase and to negotiate.
10. Speaking of negotiations…
No one likes an increase in rent. That’s why create an opportunity with the tenant to negotiate. Hear out their thoughts and make sure that the two of you will meet in the middle.
If you keep these factors in mind, you will surely arrive at a very reasonable price that your current and future tenants will surely agree upon to.
