It may seem obvious, but raising rent and determining rent pricing strategically is an easy way to increase your rental revenue each month. However, setting the rent price isn’t that easy. Raising rent without doing the proper preparation and market research will chase away potential tenants, and you’ll be worse off than you started.
Here are a few tips to raise your rent prices and some alternatives that will increase your revenue as well.
Related: How to Set a Fair Rent Price for Your Properties
Conduct research
Understanding the market is a surefire way to ethically and accurately raise rent prices. Without getting a feel for the competition, it can be easy to overprice or underprice your property — you could either scare away potential tenants with your lofty price tag or miss out on more income if you price the unit too low.
When setting a rental price, you must justify it with data collected from your neighborhood and determine a rent-to-value ratio using comparable properties in the market. Market rent is the expected amount of rent that your property can generate each month. This metric is based on various factors like location, amenities, the condition of the unit and the rent price being charged by comparable properties in the area, called comps.
Compare average rent prices when considering these properties. Comps are a landlord’s best friend when justifying a rent increase. They can help you understand where your property’s price fits in with the overall market and can point out potential improvements you can make to your unit to allow for an increase in rental income.
For example, if there is a unit across the street that charges $200 more a month than yours, find out why. Does it have nicer flooring or appliances? Do they include certain utilities like gas or water in their rent? Once you’ve identified these differences, you can weigh the cost-benefit analysis of doing renovations and charging more or keeping your unit priced as-is.
While you can always charge more without doing these renovations, it is important to keep in mind that renters are also doing market analysis while shopping for a new place. If you are pricing your unit significantly above market rate, buyers will most likely not even want to tour and give it a chance to justify that higher rate. If you charge a premium price, be prepared to provide premium amenities and features.
Adding value
If you decide that you are going to undertake a renovation process and open new possibilities for increased rental income, be sure to choose your renovations carefully. While a fresh coat of paint or new carpet may be necessary improvements, they won’t necessarily justify an increase in rent.
Some of the most effective, high-ROI improvements are amenities that make your tenant’s life easier. Integrated, smartphone-accessible features such as smart locks or climate control may encourage younger tenants to choose your property over another unit that does not boast these features.
It’s important to note that high-tech features tend to attract younger renters. If you are targeting a renter who is older than a millennial, you may be better off doing more traditionally high-converting improvements like replacing countertops or adding/renovating a bathroom or kitchen.
Related: How to Reduce Tenant Turnover to Increase Your Rental Revenue — 3 Essential Tips for Landlords
Other ways to increase revenue
If you do not want to undergo the time and effort necessary to do renovations and justify a higher rent rate, there are other ways to increase revenue as a landlord beyond charging a pretty penny each month.
Reduce tenant turnover
Finding new tenants each year is not only time-consuming; it’s also expensive. Marketing and tenant screening procedures can take time and money that you may not be willing to spend every single lease term.
To reduce money spent on acquiring new tenants, try to take the time up-front to find great ones that seem ready to stay for multiple terms. Finding great tenants will take more time and effort at first, but you will be grateful for that effort when you don’t have to do those tasks all over again each time a tenant moves after a single lease term.
Collecting rent online is another great way to reduce tenant turnover. Allowing tenants to pay online is easier, quicker and more convenient than checks or cash. By providing an avenue for tenants to pay from their phone or laptop, you will have a leg-up over landlords who do not offer this benefit, encouraging more tenants to resign with you rather than go elsewhere.
Add reasonable fees
Adding fees is another way to increase revenue without raising the rent price. Keep in mind that these fees must be reasonable — excessive or exploitative fee incurrence will have the opposite effect of chasing rental revenue away.
Some reasonable fees that many landlords instate are pet, parking, lease termination, landscaping and applicant fees. Pet and parking fees are add-ons for tenants wishing to bring a pet or have a parking spot near their unit. Lease termination fees are a great way to reduce the likelihood of a tenant abandoning their lease before their lease term is up. Landscaping fees can be charged to tenants who want their lawns mowed or landscaping kept up, and applicant fees are charged to those who are interested in the property and willing to undergo your tenant screening methods.
Related: Increase Your Rental Property Revenue by Making This One Simple Change
Raising rent can be a great way to increase rental revenue. However, raising rent without considering the surrounding market or potential renovations to your property is a gamble that landlords should not undergo. Chasing potential tenants away will have the opposite effect of lowering your revenue, so be careful with whatever rent increases you decide to instate.
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