When was the last time you evaluated the rental value of your investment property? To keep up with market trends, it pays to review the rental value of your property on a regular basis. If it’s been a while and you feel you need to get more out of your investment property, here’s some useful information to help you increase rent the right way without upsetting your tenants.
Evaluate the market to decide a fair rental value
You may have an idea of how much rent you would like to receive for your property, based on what your mortgage and ownership costs are. Unfortunately, rents are determined by several factors including demand for your property, the amenities it offers and the state of the local rental market.
The easiest way to determine a fair rent for your property is to ask the advice of a qualified independent real estate agent in your area. They will be able to give you a fair indication of what similar properties in your area are yielding in rent. Make appointments with more than one real estate agent and ask them to come to your property to give you an evaluation.
It also pays to research the market yourself. Look up online listings to compare other rental properties with your own. You can also attend open days of rental properties in your area to see what amenities they offer for the rental price and how your property compares.
Update your property’s amenities
Tenants these days look for updated appliances and amenities when considering a rental property. If your property’s hot water system is ancient or the heater is inefficient and costs a lot of money to run, for example, then tenants will not be prepared to pay a premium price for your property. Make sure all the basics are up to date – are the carpets worn out? Have the drapes and blinds been replaced in the last 5 years? Is your property properly insulated? Does it have a decent cooker?
Also remember that regular maintenance expenditure is tax deductible and making sure your property is properly maintained will help you to obtain the maximum rental price. Conduct regular maintenance and your tenants will be more accepting of any rental increases you may decide to implement.
Upgrade with a renovation
If you want to take your rental property into the next rental bracket, you’ll need to do more than make sure your amenities are up to date and your property is properly maintained. Find out what the more luxurious properties in your area are returning in rent and decide if it is worth the expenditure to renovate your property to take it into the next rental bracket.
Two key areas to focus on when renovating your investment property are the kitchen and bathroom. Your renovation doesn’t have to be expensive, mind you. A stylish renovation of both kitchen and bathroom can be achieved on a budget with good design.
Look at adding luxuries to increase rental values. Install a coffee machine, a dishwasher or a split level air conditioner, for example. You can expect to raise the rent on your property by $10 – 20 per week for each luxury appliance that you install, provided they are modern and new.
Wait until the lease expires
During a fixed lease term, the rent cannot be increased unless you have included a clause in the lease saying that it can. Most standard leases do not include these clauses and that means you will have to wait until the end of your tenant’s current lease to increase the rent.
In a market where rental prices are rising rapidly, opt for a shorter lease term of 6 months. Alternatively, include rent-rise clauses in the lease if it is to apply for longer than a year.
When the lease is approaching the end of its term, send your tenant a written notice that you will be increasing the rent and state the new amount. In most states, you are required by law to give at least 60 days notice in writing of a rental increase, so send out your notice before the lease expires.
If your tenant wants to renew their lease, they must agree to the increase in rent. If you raise the rent in small increments at the end of each lease, the tenant will be much less likely to leave than if you raise the rent by a large amount. Review the rent on your investment property whenever a lease is due to expire or every time a tenant leaves.
Remember, owning a rental property is a business investment. The most successful property owners have a business plan and use property management professionals to help them manage their investment. Property management costs are usually tax-deductible and getting professional advice and assistance from a reputable property manager can save you thousands and make the work of managing your investment property simple. If you need a referral to a reputable real estate agent or property manager, please let us know. We’ll be happy to help.