One of the first considerations for property owners choosing to rent out their property is what rental rate are they going to request from their potential tenants. Meanwhile, renters looking at prospective places to live are weighing how much they are willing to pay in rent. The cost of rent affects both parties, and rental increases can drive away renters while losing income for property owners with each day of vacancy.
Setting the Right Rate
Setting an appropriate rental rate at the time of lease signing helps property owners avoid having to raise the rent after the first leasing term has expired. Setting the right price takes a significant amount of research into market trends and comparable rental properties in the area. In Sarasota, for example, the average 900 square foot apartment rents for roughly $1400 per month. If you’re choosing to rent out your property in that area, you wouldn’t rent it for $1600, because that is considerably more than the average! Pricing too high is an easy way to miss out on potential tenants. If you put your property up for rent for $1200 per month, you may have an easier time finding renters—but you would be missing out on profits. Knowing specific market trends for your area will help you understand how much you should be charging for rent. Keeping an eye on trends has the added benefit of guiding you toward how much you should be increasing your rent after every leasing period.
When Is It Time to Increase?
According to Sarasota law, there are no limits on how much a property owner can increase their rent. Rent Control was put into place in World War II to assure renters that their monthly housing cost would not exceed a certain amount, but rent control laws have since been abolished in most states. Increasing rent is often a necessity to cover taxes, insurance premiums, and the ever-rising cost of living expenses. Property owners are required to provide at least 45-60 day written notice of a rent increase, depending on the state. However, many property owners choose to use a 90-day notification for lease renewals.
Property owners are required to complete the current lease term to raise rates unless there is a clause written into the lease that states otherwise. If you choose to send over a 90-day notification at the end of the lease, you allow your renters to sign a new contract and prepare them for any increase.
Keep a Close Eye on Market Trends
One of the best ways to stay relevant with your rental and make sure that you are competitive is to research market trends. If your Sarasota property starts renting at a competitive rate, but your increase is higher than the other properties in your area, you may lose renters to other property owners. Rental increase rates are just as important as setting the initial rent price. Just as it’s more convenient for you to keep your current renter and not have re-list your property, it’s likewise comforting for your renter not to have to find a new place to live. If you thoroughly research rental rates in your area at the end of every lease term and give your tenant the required reasonable notice, your tenants will be more likely to stay in their current property.
Too High Is Just as Bad as Too Quickly
Raising rent comes with risks for any property owner: the most significant risk in raising the rent too high or too quickly is that it leads to vacancy. If you raise your rent too far above market trends, or you raise it before the leasing term is completed (if there is a clause written into your lease), renters may look into properties that are more in line with the average cost in the area. Vacancy also hides other hidden expenses; like advertising or losing out on a good tenant!
Bring in the Experts!
Raising rental rates is an unpleasant inevitability for many property owners. If rental rates are set appropriately from the start and rent remains comparable to other properties in the area, rate increases are easier for tenants to swallow. Learning the nuances of when to raise rates and setting reasonable expectations for your tenants is a difficult art. Real Property Management of Sarasota & Manatee can help you set your rental rates, know when to increase your rental rates, and help retain great tenants!
To see how a property manager can assist you in raising your rental rate, contact us today and put the property management experts to work for you!
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