Rent Increases at Renewal: How to Set the Right Number

Quick disclaimer: this is general guidance, not legal advice. Notice periods and rent increase rules vary by state and city, so confirm the specifics for your property before you send anything to a tenant.

Renewal time: do you raise the rent, or leave it alone and hope they stay another year? Get this wrong in either direction and it costs you real money, either an empty unit or years of rent you never collected and never will. I'm Matthew Whitaker, founder of Evernest. We manage thousands of homes across 50 markets, and I wrote the book How to Rent Your Home. Our team runs this exact calculation on every single lease renewal. It's a real process, not a guess.

The short version

The short version: Two mistakes cost landlords the most money at renewal: leaving rent flat for years out of loyalty, and overcorrecting with a big jump that pushes a good tenant to leave. The fix is to raise rent at every renewal using real market comps, typically 3% to 5% a year, and to spread any larger gap over two renewals instead of closing it all at once. Always run the math on what losing the tenant would actually cost before you decide a bigger number is the better outcome.

The two mistakes that cost you money

The first mistake: you've got a tenant who pays on time, takes care of the place, and never causes problems, so you leave the rent exactly where it is, year after year, because why mess with something that's working. That feels generous. It's actually very expensive. Say your rent is $1,500 a month and market rent in your area moves up 3% a year, which is pretty normal. After 5 years without touching it, you're not just a little behind, you've given up thousands of dollars every year that tenant stays, and it doesn't come back. You can't send a bill later for years of rent you should have been charging.

The second mistake is the opposite: you see how much market rent has jumped and put a big increase on the tenant who's been paying you reliably for years. Now they're doing the math too, and if the jump is big enough, moving, with all the hassle that comes with it, starts to look better to them than staying and absorbing the increase. You just lost a tenant who was never the problem, over a number on a piece of paper.

When to actually raise the rent

Raise rent at renewal, not in the middle of the lease, unless your lease and your state specifically allow it, and even then, I wouldn't do it just because the market moved. Every renewal is your one clean opportunity, once a year, to check whether your rent still matches reality.

Lease type changes your timing. If your tenant is on a fixed-term lease, renewal is the moment to make this change, and it's clean: the old term simply ends and the new one begins. If your tenant has rolled into a month-to-month lease, you generally still need to give the same advance notice before a new rate kicks in, but you're not tied to a single once-a-year date anymore. Either way, the mistake is the same: don't let the rent sit untouched year after year just because there's no lease renewal forcing the conversation.

How much to raise it

How much should depend on two things: what similar homes in your area are actually renting for right now, and how good this specific tenant has actually been.

If market rent has moved 3% to 5% since your last renewal, that's a reasonable, defensible increase. Most tenants will grumble a little and then accept it, because it's small enough not to change their math on staying versus moving. If the gap between what they're paying and what the market is actually asking has gotten wider than that, say 10% to 15% behind market, don't try to close that entire gap in one renewal. You will lose them. Close it over two renewals instead, and tell them that's what you're doing, so the second increase doesn't feel like a surprise either.

The math almost nobody runs

Here's the number that should be driving this whole decision: losing a tenant costs you way more than a modest increase ever gains you.

Say you raise rent $100 a month and the tenant decides to leave instead of paying it. You just traded $1,200 a year in potential increase for a vacancy that realistically costs you 1 to 2 months of lost rent, plus cleaning, plus marketing the unit, plus screening a brand-new tenant from scratch, plus the very real risk that the new tenant isn't actually better than the one who just walked out. An aggressive rent increase that costs you a good tenant is almost never the more profitable move, even though in the moment it feels obvious.

How to give notice the right way

When you do raise rent, give real notice. Most states require somewhere between 30 and 60 days' notice for a rent increase at renewal. Check your specific state, and honestly, give more than the legal minimum whenever you can.

Explain why. A tenant who gets a form letter with a big number on it feels like they're being squeezed for no reason. A tenant who hears "here's what comparable homes are actually renting for right now, and here's exactly how I landed on this number" feels like they're being treated fairly, even when the number is exactly the same either way.

Get that market number from real comps: similar homes, same bedroom count, same general area, same condition, listed right now. Talk to a local property manager if you don't want to build the comp yourself. Don't guess, and don't just copy whatever percentage a blog post told you to use.

One mistake worth naming directly, because it happens a lot: raising rent out of frustration from a completely different situation. You had a bad experience with a different tenant, or a different property had a rough year, and you bring that frustration into a renewal decision on a property and a tenant that had nothing to do with it. The rent number should come from the comps and this specific tenant's track record, not whatever mood you're in when the renewal date shows up on your calendar.

Consistency and loyalty matter too

A tenant who sees a small, predictable increase every year, say 3%, like clockwork, never feels ambushed. A tenant who goes 3 years with no increase, then gets hit with a 12% jump all at once, feels like they're being punished for your delay, even though that jump is just catching up to where the market already was the whole time.

There's also a loyalty question worth being honest about. A tenant who's been with you 3, 4, or 5 years and has never missed a payment has real value that a brand-new tenant doesn't have yet. That value isn't infinite, and it doesn't mean you never raise the rent, but it's a real reason to lean toward the smaller end of a reasonable range for your best, longest tenants.

What if your tenant pushes back?

Some of you are thinking: what if my tenant says they'll leave over any increase at all, even a small, reasonable one? Ask yourself honestly: is this a genuinely excellent tenant you'd be devastated to lose, or a tenant who's just good at negotiating?

If they're genuinely excellent, and the number that keeps them happy is close to what you were already planning to charge, that's usually still a good trade for you. But if they push back hard on every single renewal, no matter what number you propose, that's useful information too. It tells you this is about to become an annual fight for as long as they stay in the house.

Quick recap

• Don't let a renewal go by without reviewing your rent. Every renewal is your one clean opportunity to check it against reality.
• Don't try to close a big gap in one renewal. Spread it over two, and tell the tenant that's the plan.
• Use actual market comps, not a feeling, to set the number. Same bedroom count, same area, same condition.
• Give real notice and explain your reasoning instead of just handing over a bigger figure.
• Run the actual math on what losing the tenant would cost before assuming a bigger number is automatically the better outcome.

Frequently asked questions

How much should I raise rent at lease renewal?If market rent has moved 3% to 5% since your last renewal, that's typically a reasonable, defensible increase most tenants will accept. If the gap is wider, say 10% to 15% behind market, spread the correction over two renewals instead of closing it all at once, since a single large jump often pushes a good tenant to leave.

Is it a mistake to never raise a good tenant's rent?Yes, even though it feels generous. If market rent rises around 3% a year and you never adjust, you fall thousands of dollars behind every year the tenant stays, and that money never comes back. Every renewal is your one clean chance each year to check your rent against current market reality.

How much notice do I need to give before raising rent at renewal?Most states require somewhere between 30 and 60 days' notice for a rent increase at renewal, though the exact requirement depends on your state and lease type. Check your specific state's rules, and consider giving more than the legal minimum whenever you can.

What if the market rent is a lot higher than what my tenant is currently paying?Don't try to close a large gap, such as 10% to 15% below market, in a single renewal. A jump that big often makes moving look more attractive to the tenant than staying. Instead, close the gap over two renewals and tell the tenant upfront that's the plan, so the second increase isn't a surprise.

Does it cost more to raise rent aggressively or to lose a good tenant?Losing a good tenant is almost always more expensive. A $100-a-month increase that pushes a tenant out trades $1,200 a year in potential income for a vacancy that can cost 1 to 2 months of lost rent, plus cleaning, marketing, and screening a new tenant, with no guarantee the new tenant will be as good.

Should I give a longtime tenant a smaller rent increase than a new tenant?It's reasonable to lean toward the smaller end of your acceptable range for tenants who've stayed 3, 4, or 5 years without missing a payment, since that reliability has real value. That doesn't mean skipping increases entirely, just weighing loyalty as one factor alongside market comps.

What should I do if my tenant threatens to leave over any rent increase?Ask yourself honestly whether this is a genuinely excellent tenant worth accommodating, or someone who negotiates hard on every renewal regardless of the number. If it's the former and the number that keeps them is close to what you already planned to charge, it's usually still a good trade. If it's the latter, expect this to repeat every year.

Where to go from here

If you're managing this on your own and want help running a full renewal and rent analysis, my book, How to Rent Your Home, walks through the process in detail.

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