Could you make more money from your Hampton Roads rental property? If you're struggling to see a profit after you pay your property bills each month, it's possible you're not getting the most out of your investment property.
The right rental rate should generate enough monthly profit to help you build your income over time—when the rent is too low, you lose money. Your tenants might appreciate a low rental price, but you're in the rental property business to generate long-term income.
How do you raise the rent when you realize it's too low? You don't want to upset your tenants—but you can't keep losing money. Here's how to stay competitive in the rental market—and appropriately raise the rent for your Hampton Roads investment property.
Slow and Steady Wins the Rental-Price Race
We all know the story of the tortoise and the hare. While there are some variations on this classic fable, the essential elements describe how the hare quickly takes the lead—and seems headed toward an easy win against the tortoise. However, the tortoise ultimately wins the race at a slow and steady pace.
You never want to "frighten" good tenants with a significant increase in their monthly rent. If you have excellent, long-term tenants, use a lesson from the tortoise: take it slow. Don't try to make up all of your lost rental income with quick pricing hikes.
Ultimately, Investment Wealth Is Not a Race
Your rental property income isn't a race: You build your long-term wealth over time. Especially when you're a landlord handling your properties on your own!
When you have great tenants, you want to keep those tenants. It's essential to strike a balance between making the money you need from your property while taking care to keep the tenants that fuel that income. A bad tenant can cost you more in income than quickly raising rental rates could alleviate.
Before raising the rent to a level you think will help you get what you need from your property, understand what the rental price should be—and why you should raise it. The right rental price helps you stay competitive in the Southeast Virginia market.
Rental rates in the area have been steadily rising for the last several years, and they show no signs of slowing; a strong military presence in this part of Virginia ensures there's never a shortage of renters. Many military families who invested in a home years ago turned their property into a rental while in the service. If this rings true for you, you've chosen a great time to turn your Hampton Roads property into a rental as the market soars.
Adjusting your rental rates to meet the market is just one of the real-time demands on landlords. Thankfully, there are some strategies you can employ to help you with this process.
1. Run a Rental Price Analysis
What's worse than a rental price that's too low? A rental rate that's too high! Your rental property has a "bullseye price" that's neither too low nor too high. To find that price, you need to understand:
- The rental market
- The value of your property
- How your property compares to similar properties in the area.
When you have that information, you know your target rental price for your Hampton Roads investment property. However, if it's a significant increase over the current rental price, your tenants will respond better to small, incremental increases over time.
If you don't have the time to perform a thorough rental price analysis, bringing in a property manager in Hampton Roads can be a huge support!
2. Make a Plan
When you know the best rental price for your property, follow a plan to implement an increase.
- Decide on an incremental increase: Depending on market conditions, most landlords stick to no more than a 3-5% increase in the annual rent price. Tenants find it easier to absorb a small annual increase through their monthly rental payments.
- Check the lease agreement: The agreement should outline when rental prices can increase. In most cases, a rate increase is only appropriate at the start of a new lease term.
- Notify your tenants: You hate to be the bearer of bad news, but it's your job as the landlord. Give your tenants at least a 90-day notice that their rent will increase with a new lease. Let them know how much and when it will take effect.
Be sure to keep everything professional. Whether it's to keep up with the market or to adjust for inflation, following a clear plan when increasing the rent helps tenants adjust with you.
3. Start Fresh
In some cases, your tenants might not want to absorb increasing rent rates for a Hampton Roads investment property. That's okay! If your tenant decides to leave, don't lower the rent. You now have the opportunity to find a new tenant at the rental price that's most appropriate for your property.
With advanced notice, you have plenty of time to market your rental property and find new tenants at your new rental rate.
Seek Advice When Raising the Rent
You have to wonder if the hare would have won the race if he had sought advice on how to run one better! He had the speed and determination—but he didn't have the tools to win.
When it's time to evaluate your rental price and consider an increase, get expert help from Renters Warehouse Hampton Roads! We know the local rental market, plus we have the tools to determine your bullseye rental price. If you need to raise the rent, we'll help you communicate with your tenants.
If your tenant decides to leave, we'll help you market your Hampton Roads property and find a quality tenant to pay the price your property deserves! It all starts with our Free Rental Price Analysis. Don't lose money! Contact us to take a look at your property and receive a free rental price analysis.