Through property investing, you can learn how to build the wealth. Of course, it not going to be all sunshine and rainbow all the time. You will encounter many problems throughout your journeys. Ups and downs is part of the deal anyway. There are lots of investors choose to rent out their property investment to get steady income each month by receiving the rent from their tenant. Well, this is kind of passive income which can ensure the security of your cash flow. However, there should be a time when you need to raise the rent to maximize the return of your property asset.
Consider to raise the rent
Even though as a landlord you have rights to raise the rent, you cannot do it randomly at any time. Remember that aside from owning property investment, you also need tenants to occupy it and pay the rent. Your property may be your income-producing asset but it is also a home for another person. Therefore, raising the rent is not as simple as you thought. There are some considerations before taking that decision.
- The lease signed by your tenant should be taken into consideration before raising the rent. You may not be able to raise the rent if your tenants have signed a fixed term tenancy. You can do it when the lease period ends instead. Of course you also still have condition allowing you to raise the rent even if your tenants have signed fixed term tenancy. You get that rights if you have rental review clause written into agreement upon signing.
- Another thing to consider is the rental market. You cannot just raise the rent in overwhelming amount. You need to consider the amount based on the rental market situation as well. Small raise like 3-5% sounds fine for your tenants. More than that, they could be overwhelmed. Even though you have the rights to raise the rent, your tenants still have the rights to dispute it as well. Therefore, matching and adjusting with the rental market prices is the right thing to do before raising the rent.
- Opinion from your property manager should be taken into consideration as well. They have experience and knowledge about rental property management. Thus, their opinion can be valid. You can discuss about raising the rent first with your property manager. They also know more if the demand is high. Thus, they can give your information about your tenant’s financial situation.
- Your tenants should be included as important consideration. Therefore, make sure to let them know about the raising rent in writing immediately when your decision is finale. Mandatory notice period should be within 30-60 days. It may also different according to the state where your property is located. You can also give explanation to your tenants or let your property manager do it. Your tenants have the rights to know why you raise the rent. It makes them understand more the situation and makes everything more reasonable for both parties without opening hole for misunderstanding and dispute.
