There’s an old saying that goes something like, “The only two certainties in life are death and taxes.” We’d like to add one more certainty to that list: No tenant is going to be happy when you have to raise rent.
It’s hard to prove that one wrong! Raising rent can lead to negative feelings, and if the tenant’s sentiments are not addressed, they might move out and leave you with a unit to fill. That can be a costly situation, but it’s often avoidable.
So in the name of disproving a “certainty,” here’s how to raise rent without losing tenants.
Show them it’s not personal
Rent should always be based on the market. If a tenant wants to know why their rent is going up, be honest with them. Show them the data. We like to use Yardi Matrix because it’s one of the nation’s most trusted market intelligence sources.
With market intelligence on their side, property managers can see rents in their area, predict where prices are going and make better pricing decisions.
But even after tenants see your data, there’s a chance they could start looking elsewhere for a lower rent. Still, that chance is smaller if they know their area is experiencing rent increases as a whole.
Discuss your plans for the future
Sometimes, property managers raise rent because they are bringing in amenities that raise the value of the property. These extra features can also increase operating costs. If you’re raising rent because you’re planning a pool, yoga studio, fitness center, community room, etc., let your tenants know about the great things coming their way.
Rents may also go up when a new owner comes into a property in a state of disrepair. They may want to get to work right away, which can result in rent increases across the board.
Show your tenants what value they’re getting out of the rent increase, and they might actually be fine with the higher rate. Don’t hesitate to send an email via Yardi Breeze if you want to reach many tenants at once.
Review what tenants say in your surveys
If you have a tenant who’s unhappy with your decision to raise rent, you can try refocusing the conversation back on the things they like about your properties. Discuss how a rent increase will get them more of those great things.
But wait a second—we might need to back up here.
Are you even using tenant satisfaction surveys? You should be! In fact, you can (and should) use surveys to find out if your residents are willing to pay more rent for certain features or amenities.
Give them time to look around
It may seem counter-intuitive, but you should always try to give your tenants ample time to explore the market after you raise rent.
At the very least, you’ll need to follow all state and local laws on this issue. Most states are very clear on when landlords can and cannot raise the rent. Some areas have restrictions on how much rent can be raised annually.
But here’s something else to consider.
Even in a good market, there’s no guarantee that you’re going to fill a vacant unit with a qualified tenant. If you can afford to have an unfilled, non-income-producing unit on the market for several weeks or longer, then you can afford to give a tenant 30-90 days before restructuring their lease.
Tenants may be initially upset that you’re charging more, but if they get a chance to see the new rent is at the market rate, they may decide to stay.
And this takes us back to where we started: If you’re raising rent for legitimate reasons, you stand a good chance of getting resident buy-in.
Lost tenants after a rent increase? Here’s the silver lining
Sometimes, it’s bad to be 100% occupied.
But how could this be?
When a unit is vacant, it’s often easier to raise rent — after all, no one is there to argue.
Any time rental rates are increased, it’s possible that some people will leave, but they will be replaced with tenants who will happily pay the higher rate. At the end of the day (or month), it’s not the end of the world if some tenants leave.