Landlords need to understand how to effectively and tactfully raise their tenants' rent without losing them. The binder method rent increase way helps you successfully raise the rent without losing the tenant and binds the renter with you for long.
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Determine why you should raise the rent
You need to ensure that being a landlord is profitable for you, and you need to keep a record of the expenses and maintain a positive cash flow. Raising the rent can be the right thing to do. If you have decided on binder method rent increase, consider your expenses in the following areas:
- Property taxes
- HOA dues
- Insurance Premiums
- Higher Utility costs
- Maintenance
- Cost of living expenses
Consider these factors into rent costs during tenant turnovers or lease renewals to ensure that you are charging enough.
Know the Market Rent
It doesn't matter what service and facility you provide; if you try to raise the rent more in the local market area, your tenants can balk or leave. They won't renew your free rental application rental lease agreement leaving you with a vacant building which can be a costly turnover. So, do your work before you ask for a raise.
How Much to Raise the Rent
Feel confident and choose an exact number. Before raising the tenants' rent to that exact number, wait for some time to think how much increase you're talking about that benefits both the owner and the tenant. Calculate the percentage rent increase over the current rent.
A good thumb rule doesn't raise more than 5% - 10% per year. Any more sharp increase can often jolt the tenant into moving – even if you are not raising the rent from the nearby market. So if you are currently renting your property for $1000, and you want to increase the rent, then don't make the rent more than $1100. Instead of raising the rent by $100 at once, split it into two by raising $50 this year and another $50 next year.
Most people's budgets cannot handle the rent suddenly increasing by $100. If you think your rent is below the market rate, increase it gradually.
Inform the tenant that you are Raising the rent
Many free rental application rental lease agreements include a specific notice period for informing the tenant about the changes in the lease renewal. As a responsible landlord, you need to send a written rent increase letter before that agreement expires. A written letter is the perfect way to inform your tenant about the binder method rent increase.
Put all the necessary detail into the letter, which explains everything, leaving no confusion to the tenant over the rent increase and when it goes into effect.
Relay the information of all your expenses as a landlord on that property, so there can be less room for any argument or negotiation.
Reduce Complaints
The more satisfied your tenant is in general that stays on your property, the less likely they will complain about the small increase in their rent. They will understand the inflation in the market and understand that your expenses have gone high as well.
As a Property Owner, why you are raising the rent, explain to your tenant.
Explain that the market is rising, the prices and your expenses are going up too, and tell specific detail such as maintenance costs, utilities, insurance premiums, and increasing property taxes. Also, mention any other new amenities you have added in the past year or any improvements you plan to add in the upcoming year. This will remind them that the small rent increase will keep the property well maintained and benefit them in the long run.
Watch out for Rent Control Section 8
If you live in a rent-controlled area, the market doesn't matter; in that case, you can't charge your specified rent. All you can do is charge according to local rent control law. If you live in that area, increasing the rent will lead you to fine and angry tenants.
Henceforth, these are the ways to raise the rent without losing the tenant successfully. By following the binder method rent increase way, one will never lose the tenant while convincing them about them. Thus, if you wish to increase the rental fees, you must choose the right ways mentioned above.
