We discovered over the years that mandatory rent increase is not always the best thing. Service Star Realty boast a 75% tenant renewal rate year after year. This means that on average, a renter will stay in your rental home for 4 years while we are managing it.
We do increase rents every time we lease a property or renew the lease but we use careful consideration to retain that tenant.
However, 70% of the time, we need to use our best negotiation skills as we encounter resistance from tenants.
This is what they say:
- No upgrades/improvement were made to the property
- Competition in the marketplace does not justify a rent increase
- They simply cannot afford the increase
The entire renewal needs to make financial sense. An annual rent increase as of late is averaging 5%. On a $1000/month rental, that is $600 more for next year. If the tenant moves out, finding a new tenant will cost that much and more if we consider what repairs will be needed on the property, utility and landscaping charges.
As far as the tenant goes, if you have a good tenant in place, who pays their rent and has not violated the lease terms, no reason to gamble with a new tenant, an unproven one. There is always a risk.
This is where careful consideration needs to take place, we help best evaluate the situation for you:
- Review each file on an individual basis, avoiding across the board increases. Consider market rent and the quality of the current tenant.
- Sharing market data with tenants to sell the increase.
- Ask landlords to be flexible as tenant are more educated nowadays and know how far their dollar will stretch. Be prepared to offer incentives for them to stay.
These steps help smooth the transition toward higher rental prices in the right cases. With these steps in mind, we can work to increase revenue for our investors and lower vacancy rates.
