With the steady increase in current rental remuneration over the last 5 years, landlords have had to increase the rent in order to earn a sufficient profit from their property. Several surveys in California report that, on average, 88% of property owners or managers have increased their rent prices in the last few years (2018-2021).
However, considering the widespread economic impact of the COVID-19 pandemic, landlords also need to be more understanding about renters who have lost their jobs and offer them some respite when it comes to paying their dues. In all likelihood, tenants will appreciate this gesture and, in turn, be more accepting of rent increases as we recover from the pandemic.
Now the principal question becomes, how do you maintain this fine balance? Here is everything you need to about how and when to increase rent for tenants in California.
What Is the Right Time to Increase Rent?
The first step, before increasing the rent, is to do some market research regarding the current rental remuneration in your neighborhood and the potential for increase, as per market trends.
If you are the only one who is suddenly hiking up the rent, it may result in you losing a good tenant. Keep pace with the rent increases in your neighborhood. Determine the average rent of similar units in the market and in the neighborhood and then increase the rent accordingly.
In addition, check your state laws and the lease agreement and find out the minimum number of days to inform the renter in advance. In general, landlords are supposed to inform the tenant 90 days before the renewal of the lease, about the upcoming rent increase. This will give the renter enough time to accommodate for the increased amount in their budget and convey whether they can continue with the lease.
How to Increase the Rent for Your Tenants in California?
- Maintain a good relationship with your tenant
When the landlord and the renter have a good relationship and mutual understanding, there are fewer complaints from tenants. Additionally, when the occupant is happy and satisfied with your property, it is less likely that they may quibble over a minor increase in the rent.
- Increase the rent gradually
In order to maintain the time gap between normal hike to sudden hike, landlords can opt for a gradual increase in rent, in accordance with state laws. According to rent control laws in California, landlords cannot increase rent more than twice in a year, with a maximum rent increase cap of 5% + 10%CPI.
- Explain the reasons for rent increase to the tenant
While increasing the rent, you need to have satisfactory answers ready for any questions tenants may ask. You can cite the increase in property taxes, maintenance costs, insurance premiums, utilities, and other charges in the rental business due to which you are taking this step.
In addition, you can inform the tenant how your payment compares to the standard market rates, and justify your rent value. This makes them less likely to think unfairly of your increased amount.
As a landlord, you can increase the rent as per your inclination, as long as you give adequate prior notice to your renters and follow rental laws in California. With a good rent growth strategy based on the standard market trends, it is possible to raise the rent without losing quality tenants.
Connect with us at Action Properties, California for more advice related to increasing rent for your California property. Action Properties is one of the most reputedquality tenants and trusted property management companies in California and we would be glad to assist you with your real estate requirements.