How Much Should You As A Rental Home Owner Raise The Rent?
The rental income from your investment property is very much a part of the Remote Control Retirement Riches formula. So, raising the rent on your investment property can seem like a no-brainer. Higher rent means more income, right? Well, it isn’t quite as straightforward as all that. You need to assess the situation on a case-to-case basis and examine whether upping the rent is justified or whether it will be counterproductive. The advice of your property manager is going to be very valuable when making a decision, as I explain in my podcast.
Pros and cons of raising the rent.
In many cases, bumping up rent to the market rate can make sense. It can make sense when one tenant is leaving and another tenant is going to move in. Then, offering your property up for rent at the market rate to a new tenant absolutely makes sense. That rental income is going to help you repay the loan, so this is certainly a good idea.
However, this is not a one size fits all type of rule. If, say, you have the ideal tenant: your tenant of several years is someone who pays their rent on time each month, is pleasant and looks after your home well…such a tenant is valuable – perhaps more valuable than a few more bucks in the bank. Rather than bump up the rent and risk this nice and ideal tenant leaving, consider leaving rent a little below market levels. You buy yourself goodwill and peace of mind here when you forego the increase in rent. It is a good bargain!
What does the property manager say?
This is an important rule of thumb – don’t micromanage your property manager. Remember, you hired them for a reason, and that reason is their expertise and experience in the business of renting out and looking after properties. Very often, your property manager will have the best advice on the matter of when to raise rents and how much. They will be able to gauge whether raising rent is justified at any given time.
Sometimes it doesn’t make sense to raise the rent if it means your very good tenant is going to leave. Not only do you lose a good tenant, but you also incur expenses in terms of repairs and sprucing up the place before you let it out again.
So, to recap, there is no one fixed rule when it comes to raising the rent on your rental property. Examine the pros and cons of raising the rent of your rental property before deciding. Definitely factor in the advice of your property manager because their insight and experience are valuable. To know more about this, sign up for our upcomingquarterly real estate expo(it’s free).
ICG uses single-family home investments, bought in advantageous locations and the best U.S. markets. We enable you to enjoy the clout that comes from purchasing a multitude of houses, even if you only buy one.
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