Staying up to date with the local rental values in Atlanta is essential to keeping your investment property occupied and profitable. You need a competitive rental value that reflects the market and the unique qualities of your rental home.
You think about your price when you’re preparing to list your rental, and you also think about it when you’re renewing a lease agreement. How can you be sure that you’re earning as much as you should on your property without risking a vacancy and expensive turnover?
As Atlanta property managers, we deal with this question daily. We have some best practices for rent increases and lease renewals, and we’re sharing them with you today.
Timing Your Lease Renewal Offer
When is the best time to inform your tenant that the rent will go up when the lease renews? We believe it’s best to start the renewal process at least four months before the lease expiration. A reminder notice should be sent to the tenant 30 to 60 days before the expiration of the current lease. If the tenant is happy with the terms of the lease and plans to stay, it may only require a few updates and signatures. You’ll also want to give them time to contemplate the new rental amount and whether it’s in their budget.
Communication is the key to a successful relationship between landlords and tenants, and this communication is especially important when the lease is renewing. When you want to increase the rent, it’s essential to communicate the reason for the rate hike and provide your tenants with comprehensive and legitimate data. You can provide comparable rents in the area and even invite them to look at other properties available in the market.
Good communication and reliable information establishes credibility and sets concrete expectations for how the renewal process will proceed.
Understand the Local Atlanta Rental Market
It’s critical that you understand the rental market and the prices that this market supports. If you raise your rent at renewal time to the point that you exceed market value, you’ll give your current tenants a good reason to leave, and you’ll have a hard time finding new tenants who are willing to pay your too-high price.
Take the temperature of the market to understand what kind of increase is reasonable.
Many owners use online rental sites like Zillow or Trulia to price their property and adjust the rent at renewal time. Zillow does not know the nuances of your neighborhood, though. They don’t know what types of improvements you may have made to the home, and they cannot possibly understand all the variables that go into rental pricing.
To effectively raise the rent, you’ll need to get your hands on some data that’s more reliable and more local than a large online site. Talk to a property manager, especially if you don’t live in the neighborhood that’s home to your investment property.
Property managers who have invested in good technology will have access to property management insights and analytics that can give you a more accurate and trustworthy rental value for your property. You’ll use this as a starting point when you make your renewal offer.
How Much Should You Raise Your Rent?
This is really what it comes down to. The Atlanta rental market is strong and competitive. Tenants are looking for high-quality, well-maintained homes, and they’re willing to meet the higher rental values that we’ve seen over the last couple of years. Tenants often expect their rent will go up when the lease renews. How much can you comfortably raise your rent without losing your tenant?
Here’s what we recommend:
If you want to keep your current residents and ensure they’ll renew the lease agreement, keep your rental increase to between 5 and 8 percent at renewal time. This will ensure you stay slightly under market. Those tenants won’t have a reason to go looking elsewhere. Today’s residents are smart. They’re informed. They’ll know they’re getting a good deal, especially if you’re providing a fantastic rental experience. Not only are rents higher outside of the home they’re currently living in, they also know they’ll have to face the cost of moving. That requires time and financial resources.
When you have a good resident who takes care of the property and pays rent on time, you don’t want to squeeze them financially. Keeping a great tenant in place is worth giving up a little bit of your profit margin at renewal time.
Offer Value and Incentives with Your Rent Increase
In today’s competitive rental market, it makes sense to encourage your tenants to renew their lease agreement by offering incentives such as discounts and other benefits for long-term tenancy. There are a few ways to do this.
- Discount the rent for a longer tenancy. For example, maybe the rent goes up by $125 a month for a 12-month renewal but only $100 per month for a 24-month renewal.
- Offer rebates for on-time rent payments. If rent is paid on-time for six months straight, you can deduct $50 from month seven, for example.
- Consider what may need an upgrade or a replacement. Does the tenant want a new microwave? Is the refrigerator ready to be replaced? These incentives for a renewal are a great idea, not only because the tenant is getting something in return for the higher rent but because you would have made those improvements anyway, if the tenant decided to move out. It’s cost-effective.
As a landlord in Atlanta, it’s essential to stay up-to-date with current regulations and best practices for lease renewals and rent increases. Make sure you check your lease agreement so you’re in compliance with timelines and notice periods.
Effective communication, early lease renewal intervention, incentive offers, and understanding best practices like these will help you negotiate a reasonable rent increase that’s both competitive and profitable.
If you’d like some help deciding how and when to raise your rent, please don’t hesitate to contact us.
Silas Frazier Realty serves rental property owners in Atlanta, Snellville, Stone Mountain, Lilburn, Conyers, Smyrna, Marietta, Lithonia, Jonesboro, McDonough, Vinings, Brookhaven, and Tucker.