Now, there are probably several different factors that you need to think about when considering to raise the rent.
And some of those things might include, essentially, what the market is like.
Typically, in an area where house values are increasing at a good, steady, like at a national pace, or even higher than the national pace, tenants are going to expect a little increase in rent.
And so opposite of that is when you think about areas that really aren’t experiencing a lot of appreciation, like property appreciation, they don’t expect rent appreciation or rent increases as often.
So that’s one thing you need to consider. Like, the question would be where is your house located?
Is it in a growing area of town, or is it in a pretty stagnant area of town? If it’s in a growing and appreciating area of town, you may want to consider raising your rent.
If it’s in a very stagnant area, you’re going to have to really weigh that because the last thing you want to do is to raise rent, or when you go to renew that lease you have that rent increase in there.
The tenant then is going to have the opportunity to go look elsewhere and to cancel that lease and say they’re not going to renew.
This is something…obviously, we’ve leased houses to tens of thousands of people over the years since 2008, and this is something we look at all the time.
So in Birmingham, on our Birmingham lease, we have an automatic rent increase each year.
But we also talk to the owners, our owners, every year that a lease renewal comes up. So we’re talking to them and saying, “You know, here is the rent increase.
It’s inside the lease. Is this something you want to pursue? Is this what you would like to present? First of all, do you want to renew the lease to the tenant? And then secondly, do you want a rent increase?”
What we found is some owners are perfectly fine not increasing rent just to keep a tenant happy and in place because if you have too much of a jump in rent increase, the fear is that they’ll start thinking about, “Well, I wonder what else I could get out there for the same amount of money?
Is there a better option, maybe a newer home, a home that’s in better shape?”
So that’s the conversation we have with every one of our owners usually about 120 days out from the lease renewal, and then we begin reaching out to the tenant 90 days out just so we can get ahead of the game.
I would seriously think about that as far as to rent increase how-to-know.
If you’re in a somewhat of a neutral area, maybe has a little bit of appreciation, then you may want to take it slow.
Maybe it’s just like a 1% increase in rent, something small and minor but over time, or maybe you want to have a year where you don’t have rent increase and then raise it 2% or 3% the next year.
So these are all things you want to consider.
Also, if you’ve had any kind of issues with the tenant, maybe you’ve been slow on some maintenance, or they’ve had a problem that they’ve had to deal with that’s not been any fault of their own, and so you may want to consider keeping the rent the same.
However, again, I know we’re also in markets like Nashville and Denver, which are extremely hot right now for real estate, like rental real estate.
And so owners are more likely to raise the rent a little, at least a little bit each year.
Birmingham, not as hot of a market as those two places, and so we see moderate increases in rent, not a huge increase because people again will go look elsewhere.
So I hope that helps you kind of think about you really have to understand where your house is.
And if you’re an out of state investor investing in Birmingham, just really understand, maybe even pull some comps in the area, some fresh comps from, you know, they’re going to be different from a year ago possibly. And then look and see what the going rate is.
We have a system that does that for us, that pulls comps, and we can kind of give you an idea if you should raise the rent or keep it the same.
But, ultimately, if you’re a landlord and you’re out there and you’re having interaction with the tenant, you’re going to have a pretty decent feel for how they’ll react to that.
So I hope that helps you figure out when to raise the rent on your Birmingham rental property.
Spencer is the VP of Marketing at Evernest. He wakes up with Google and Facebook on his mind. Having bought and sold over 150 homes in Birmingham, Spencer gets a kick out of helping new and seasoned investors navigate the mistakes he made as an investor. Spencer is also passionate about his love for Michael Jordan and does his best to explain to the Millennials (who never saw him play live) how much better he was than LeBron. He loves to hang out with his wife, kids, and the world’s best black lab, Jett.