Rent prices all over the United States are increasing, and for many different convergent reasons. In Texas, especially around the Houston and Katy areas, rent increases are especially pronounced. That’s partially because Texas is becoming an increasingly popular place to live, attracting prospective tenants from all over the country and increasing demand for housing.
As property owners, if you’ve had tenants in your rental properties for a while, it might make financial sense to increase rent. However, you likely know this is a risk; if you increase rent by too much or if you mishandle your increases in rent, you could end up losing your tenant. Even if you manage to retain your tenant, he or she may become bitter, distrustful, or otherwise resentful about the increase in rent.
How should you handle tenant concerns about rising rent prices? And how can you handle an increase in rent effectively?
Your first responsibility as a property manager is to ensure legal compliance. You need to increase rent in a way that complies with all applicable laws and ordinances, as well as the language in your rental agreement.
In Texas, “There is not a statewide law that limits how much a landlord can increase the rent when an existing lease is renewed. In fact, Texas law only allows cities to establish local rent control ordinances in certain cases. A state of disaster has to be declared, and the city must find a housing emergency. The governor must approve the ordinance before it can go into effect.”
However, there are some local laws that may dictate how and when you can raise rent prices. Make sure you investigate them and consider hiring a lawyer to make sure you understand the law properly.
Beyond that, it’s important to review the terms of your lease contract. Does this document state how and when rent can be increased? Are there any stipulations, such as detailing a process for advanced notice? As long as you remain fully compliant, there shouldn’t be any legal ramifications for your decision to increase rent collection.
Your lease agreement will likely dictate terms for notifying a tenant of increasing rent for the rental property. In many situations, you’ll need to give the tenant at least 30 days of advanced notice that the rent is increasing; sometimes, you’ll need to give as much as 90 days of advanced notice.
Even if your lease doesn’t require this, the more advanced notice you can give to your tenants, the better. It’s a show of respect and gives the tenant plenty of time to find a way to come up with the money (if they want to remain living here).
Additionally, offering flexible payment plans or extending the due date can give tenants more time to come up with the extra money needed.
Make sure you put your notice in writing so you have proof of the advisement.
Tenants will be able to process the increase in rent much more easily if you keep your rent hike reasonable. Increasing rent from $1,200 a month to $2,000 a month is not reasonable, even on the off chance there are similar properties in the area charging that much in monthly rent. Many people are finding it hard to make ends meet already, so doubling their biggest expense is practically unreasonable.
What qualifies as “reasonable” is highly dependent on your specific circumstances, so there’s no universal recommendation we can make here. Still, any increase in rent of 10 percent or less should be relatively easy for your tenants to handle.
As a property manager, it’s crucial to consider the financial impact on tenants when adjusting rent, especially for those in multifamily buildings. Ensuring that rent raises are modest and providing clear communication about any changes to security deposits can help maintain a positive landlord-tenant relationship.
When talking to your tenants about the increase in rent, try to be as considerate and delicate as possible. Instead of calling it a rent increase, call it a rent adjustment. Express an understanding that this isn’t favorable to your tenant and may cause them some financial distress. The more human your communication is, the better.
Tenants will be able to better understand the increase in rent if you take the time to explain your reasoning. These are some of the most reasonable motivations for increasing rent:
Insurance increases. An increase in your insurance costs should also be reflected in increased rent prices.
General Inflation. Inflation is making the cost of practically everything higher, and it’s very reasonable to increase rent proportionally.
The competitive environment. You can and should also increase rent in line with local market conditions.
If your tenant is unhappy about the increases, try not to get into a direct argument with them. Instead, listen with empathy. Maintain your position, openly listen to their concerns, validate those concerns, and reiterate the reasons why rent has to go up.
Finally, make sure you understand the options available to a tenant who cannot tolerate the increase in rent.
Negotiate. The first option is for the tenant to negotiate a lower rent price with you. It’s totally up to you whether you’re willing to enter negotiations. Sometimes, keeping a tenant is more valuable than increasing the rent. Sometimes, you’ll be able to work out a new arrangement that’s mutually beneficial.
Leave. If negotiations fail, or if the tenant doesn’t want to negotiate, they can choose not to renew their lease. If your rent increase is in line with the rest of the market, you should have no trouble finding a new tenant. It’s a bit of a hassle, but it might be worth it.
Navigating the world of property management on your own is extremely challenging. It’s your responsibility to understand the laws dictating rent increases, the competitive landscape of rent prices, the details of your lease agreement, and even your tenants’ disposition – and those are considerations relevant to just one aspect of property management.
Your job gets much easier and much more hands-free when you choose to work with an experienced property management company. If you’re interested in learning more about how our property management professionals at Green Residential can save you time and eliminate your stress, contact us for a free consultation today!
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