For many landlords, costs are going up. Demand may also be going up, and you may have realized you are behind the curve on rent. However, you know that if you hike the rent too much or too quickly, you will lose tenants. Tenant churn could easily cost you a lot more. So, here are some strategies you can use for raising the rent in Colorado Springs without losing tenants.
Check Landlord-Tenant Law
You don’t want to get sued, so make sure you follow any applicable laws about raising the rent. In Colorado Springs, there is no rent control, so there are no limits on the amount you can raise the rent by. However, you cannot raise the rent in the middle of a lease, and you must provide a minimum amount of notice to the tenant. For a one-year lease, you need to give at least three months’ notice. Even if you have month-to-month tenants, you still have to give them ten days warning.
Know the Market
Don’t raise the rent such that you are now more expensive than other places. Moving is a pain, but if your tenants think they can get a better deal elsewhere, they might just bite the bullet. Keep your rent competitive, and use apartment and rental search sites to see what others are charging for comparable rentals.
Raise the Rent Every Year
It might seem like a paradox, but raising the rent a small amount every year is better than waiting five years then hiking it. Your tenants will get used to the rent being increased.
If possible, peg the increase to the cost of living, that way there is a decent chance your tenants’ salary will keep up with the rent increase. When you get new tenants, be up front about annual rent increases and ideally about what percentage you plan on raising it.
Even if you are behind the curve, don’t hike the rent by several hundred dollars. Increase it incrementally instead. Sudden jumps will cost you tenants.
One common mistake landlords make is to calculate a rent increase and then just send it out with the lease renewal. If the rent increase is more than you normally charge, then you need to politely explain to your tenants exactly why you are increasing the rent. For example, if it is to pay for new amenities, then your tenants will generally understand. If it is because of maintenance costs, don’t be afraid to say so.
Always be polite and understanding.
Be Willing to Negotiate
If an excellent tenant comes to you saying they can’t afford the rent increase (for example because their employer froze their wages), be willing to negotiate. The cost of replacing a tenant may prove to be higher than giving them a break on the increase. Obviously, this is something you should do the math on, but also remember the value of goodwill and a good reputation. Happy tenants and unhappy ones alike will talk and potentially go on social media to tell everyone who wants to listen how good or bad you are.
You can also be flexible with solutions such as spreading the increase out across the lease.
Avoid Discrimination or Retaliation
While you should be open to negotiation with good tenants, you also need to make sure you can’t be accused of discrimination. This typically means raising the rent about the same for comparable rentals. This way if you do give somebody a break, it is because of specific circumstances. Make sure you are not more likely to give a break to certain types of tenants and that you do any negotiation based entirely on the tenant’s rental history and behavior. It is typically illegal to, for example, raise the rent only on a Muslim tenant, and you need to make sure not to do that kind of thing by accident.
Also make sure that you don’t raise the rent on somebody right after they, say, complain about slow maintenance. You don’t want them to file a retaliation suit.
Raising the rent in Colorado Springs without losing tenants ultimately means keeping your increases reasonable, giving proper notice and, above all, communicating the rent increase and your reasoning clearly and politely.
You can also get a free rental property management assessment and analysis to help you determine if you are charging the right rent. Give us a call at 719-471-RENT (7368).