How to Increase the Rent of Your Rental Property
As a rental property owner in the Dallas-Fort Worth area, one of the key decisions you’ll face is when and how much to increase the rent on your investment properties. Striking the right balance between maximizing revenue and keeping good tenants can be tricky.
You want rent collection to run smoothly no matter what, so increasing rates is a delicate dance. Whether you’re on the fence about knowing when it’s time to increase rates, the legal implications behind rent increase or how to approach renters, Classic Property Management has your back. Let’s get into how you can increase the rent of your rental property without raising too many eyebrows.
Signs It’s Time to Raise the Rent
Not sure when the best time is to increase rent? Here are some of our biggest signs that it’s time for an increase.
Market Conditions Have Changed
One of the biggest factors influencing rent prices is the overall market demand and supply of rental housing in your area. If similar properties in your neighborhood are renting for significantly more than your current rate, it may be time for an adjustment. Monitoring services like Zillow and Rent.com can give you insight into local rent trends.
Your Property Has Been Upgraded
If you’ve made renovations or upgrades to your rental unit, such as new appliances, flooring, or an updated kitchen or bathroom, you likely have justification to increase the rent to account for the improved value of the property.
It’s Been A While Since Your Last Increase
Even if the market hasn’t dramatically changed, over time the increasing costs of property taxes, insurance, maintenance, and other expenses can eat into your profits. An incremental rent increase every year or two can help keep your investment cash flow healthy.
Approaching Tenants About Rent Increases
The key thing to keep in mind is clear and proactive communication with your tenants. No one likes surprise rent hikes, so make sure you give proper notice.
In Texas, there is no statewide law mandating notice for rent increases on periodic leases (i.e. month-to-month). However, most landlords provide at least 30 days’ notice before increasing rent as a professional courtesy.
For fixed-term leases, you cannot raise the rent until the lease term expires and it’s time for renewal. Be sure to notify your tenants well in advance of the lease end date that their rent will be increasing with the renewal.
It’s also a good idea to have an in-person or phone conversation with your tenants, explaining your reasoning for the rent increase, in addition to the written notice. Open communication and transparency can go a long way toward tenant retention.
Legal Considerations for Texas Rent Increases
Unlike some other states, Texas does not have a statewide rent control law that limits how much landlords can increase rent prices, either year-over-year or during the lease term. However, some municipalities in Texas may see themselves in a rent controlled situation in a state of disaster and there is a need for emergency housing.
Without rent control, you as a landlord, have free rein to responsibly increase rent as market conditions allow, as long as you provide any required notice and follow the stipulations of any active lease agreements.
Also, remember, you cannot raise the rent in a discriminatory way based on a tenant’s race, religion, national origin, family status, disability or other protected class.
Determining a New Fair Rental Rate
So once you’ve decided to implement a rent increase, how do you determine the new reasonable rental rate?
Market Comparable
Research the current average rents for similar rental marketing nearby in terms of square footage, number of bedrooms/bathrooms, age, and amenities. Bring your rent in line with the market for your area.
Operating Expenses
In addition to market conditions, look at whether your costs for taxes, insurance, maintenance, etc. have increased. Your new rent should take those higher expenses into account.
Property Improvements
Have you added new amenities or completed any major upgrades recently? Those enhancements should translate into a higher rental value.
Most landlords aim for annual rent increases of 2-5% to keep pace with inflation and rising costs. However, if the market has shifted considerably higher, or it’s been many years since your last increase, 5-15% could be justified.
Ultimately, the goal should be to strike the right balance of staying competitive, fairly compensating yourself as the property owner, and providing a reasonable value for tenants.
Let Classic Property Management Help Navigate Rental Rate Increases
Determining the optimal rent price for your investment property and managing tenant relations around rate increases can feel like a tricky balancing act. That’s where the experienced team at Classic Property Management can help.
Our local market expertise and data-driven approach takes the guesswork out of pricing your rental listing competitively. We monitor trends across the Dallas-Fort Worth area to recommend appropriate rent increases aligned with your investment strategy. We’ll also handle all communications and legal requirements around rent increases to create a smooth, hassle-free process for you.
If you’re considering a rental rate increase or could use assistance managing any aspect of your rental properties, contact us today. We’re here to help maximize your investment while providing a great experience for tenants.
