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Criteria for a Successful Rent Increase

 

Using rental property as an investment is like any other business; to improve cash flow, you must either reduce expenses or increase income.  Increasing income is usually easier to achieve, but unless the residents are on a month-to-month lease, the only times you can increase the rent is when the lease expires, assuming the rental market will allow an increase.

Rent increases in the 4-6% range are usually common, but it is not abnormal to see hikes as small as 2% or as high as 10%.  It usually best to increase the rent even if only a minimum amount each time the lease renews.  This way the resident is used to expecting an increase.  Also the owner avoids having to tack on a large increase when the resident has been in the property for several years at below market rent.  A large increase is more likely to cause a resident to move then several smaller increases.  It is also recommended to increase the rent when a resident request that they lease the property on a month-to-month basis.  A Month-to-Month lease is normally an advantage to the renter and a disadvantage to the landlord as residents normally expect to pay a little more.

When considering the amount to increase, figure what your market rent would be.  The increase should not be substantially higher than what a comparable house would be renting for.  A comparable property would be a house that closely resembles your house in size, age, location, and amenities.

Despite your best efforts, some renters will choose to move away anyway regardless of an increase.

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