If you have tenants in a property for a long time, the temptation may be to keep the rent as it is. The common thought is that they are great tenants, so rocking the boat is going to just cause unneeded friction, and what if they leave! This is an absurd fear because property management decisions are business decisions, and the former comments are very emotional reactions. So, let's go through a few steps you should undertake when considering a rental increase.
Review frequently
Generally speaking, it is advised to consider a rental increase every 6 months. Review the market, do some research, and make a determination based on those factors. That being said, just because you do the research, doesn't mean that you have to pull the trigger on a rental increase twice a year. You might, but this would be considered extreme by many. Having the information though can sometimes be just as valuable as the money.
How to make the decision
When researching the market, it is important to look at the right figures, in order to make an appropriate determination. The first is the obvious one, what are similar properties currently being rented at? If it's lower than your current rent, you may want to hold off on an increase, you're already getting a good deal. If what you are getting paid is lower than similar properties though, a small increase to bring your rent into line with those similar properties will be wise.
Another key factor to look at is how long rentals are staying on the market. To use an analogy, let's say you are being paid $500 a week in rent. Every week that the property is empty, is a week that the $500 rental income isn't being paid to you. So, if you know that properties are taking 3 months to fill in your area, that is $6,000 that you are essentially leaving on the table, if your current tenants leave. So, when increasing the rent, consider that there is value in retaining your current tenant and keeping them as happy as possible. It may be prudent to wait until tenancies are being filled faster to raise the rent.
Summary
Raising the rent is a business decision that should be taken logically, and in order to maximise profit. Review often, and research in detail; two key areas we have highlighted are similar properties and their rental prices, as well as how long it is taking to fill properties. If you own a property and are looking for an expert real estate agent to assist you in optimising rental income, look no further than House Estate Agents. Call us today, on 07 4580 0811.