Deciding when or if you should increase the rent on your rental property can be difficult. As a landlord, you need to be mindful of how a rent increase will impact your ability to stay competitive in the rental market for your area, how it will impact your existing tenants, and if you need to do more to make the increase worthwhile.
For instance, you may need to consider completing renovations on the property or offering more amenities to your renters to make your property more desirable to tenants.
In this post, we suggest the two best times to increase rent to make the transition as smooth as possible for tenants.
Related Document: Notice of Rent Increase
1. Increase Rent when Renewing the Lease
If you decide to increase rent, one of the best times to do so is when the lease is ready to be renewed. A standard Residential Lease Agreement usually comes in two forms: a fixed term lease or an automatic renewal lease.
A fixed term lease typically means that the tenant rents the property at a fixed price for a certain period of time (e.g. $3,000 for three months). In contrast, an automatic renewal lease renews automatically after a certain period of time (e.g. every three months, six months, or year). With an automatic renewal lease, one of the parties (either the landlord or the tenant) needs to provide notice when they want the lease to end.
A landlord can typically choose to increase the rent with both types of leases, but rental laws may differ depending on your area, so it’s important to double-check your jurisdiction’s regulations before proceeding with a rent increase.
With a fixed term lease, the end of the leasing period gives you an opportunity to either negotiate rent with your tenant (if they decide to continue renting with you) or check your local rental market to see if you can simply increase the rental price when you list your property.
If you’re using an automatic renewal lease with your tenant, then you most likely have to give your tenant notice before increasing the price of rent. An appropriate time frame for giving notice is typically 30 days, but could differ depending on your local rental laws. In addition, depending on your local laws and landlord obligations, you may also have to provide a reason for the rent increase (e.g. rising utility costs).
2. Increase Rent in the Right Season
As a landlord, you can take advantage of seasonal trends to determine what time of year is the best to increase your rental prices. Anytime demand for rentals is higher, you can probably get away with increasing your rent to match the growing demand.
For instance, if you have a residential rental property in a city that experiences harsh winters, people tend to want to move in the summer as the weather is usually better. In addition, students that are planning to attend post-secondary school in the fall often start looking for accommodations in the spring or summer, so demand for apartments and other rental properties is often higher at this time of year.
Keep in mind that landlords typically benefit from seasonal trends when they are trying to find new tenants, so using seasonality as an excuse to increase rent could yield mixed results if you want to keep your existing tenants.
Should Landlords Increase Rent?
As a landlord, you’ll need to decide if increasing rent is worth the potential risks (like losing tenants or having fewer rental applications due to increased rental prices). Some common reasons for increasing rent could include:
- An evaluation of the rental market in your area determined that the price of your rental property is lower than similar properties in the same area
- Increased costs to the landlord, such as utilities or property taxes
- Renovations or additional amenities have increased the value of the property
As a general note, you’ll have to ensure the lease you signed with your tenants will allow for an increase. From here, you still have to comply with your landlord obligations by notifying your tenants in advance of the increase with a Notice of Rent Increase.
Increasing Rent Successfully
Before you raise the price on your rental property, be sure that you are considering all the factors that could affect whether you can retain or attract tenants, such as timing and seasonality. If you’ve done your research, you should be confident that your decision to increase rent will benefit you in the future.