When Should a Landlord Increase Rent

As a landlord, you need to adjust rent prices regularly to make sure your property is priced fairly and that you’re making enough money to cover the increasing costs of property ownership. However, it’s not just a question of when you can raise the rent but under what circumstances you should raise the rent.

Automated rent collection without the stress.

Why raise the rent?

No renters, no income. As a result, you have to approach raising the rent with careful consideration and empathy for your tenants. Here are some common reasons why a rent increase might be necessary:

  • Rising inflation: Rent increases might be required to keep pace with inflation rates and maintain (or increase) profit margins.
  • Market rates increase: You may need to bring your rent amount up to the current market rate for comparable properties in your area.
  • Higher operating costs: A rent increase may be necessary to cover higher costs for utility bills and maintenance, plus larger expenses like mortgage payments and property taxes.
  • Rental property improvements: Upgrades or new amenities can increase the market value of the property, which can be reflected in higher rent prices.

Factors to consider before increasing the rent

  • Similar rentals: Compare prices for similar rental property listings (called rental comps) on websites like Zillow.com or Realtor.com or use a rent calculator.
  • Legal requirements: Check if your local or state laws limit the amount or frequency of rent increases.
  • Notice period: State landlord-tenant laws may require you to provide tenants with a rent increase letter 30 to 90 days in advance.
  • Security deposit: Consider whether you will adjust the security deposit to match the increased amount of monthly rent. Some states restrict how much a security deposit can increase or if it can at all.

When can a landlord increase rent?

Landlords can usually raise rent prices when a lease expires. You can either sign a new lease or amend an existing one with the new rent price and end date when offering a lease renewal. If the lease converts to month-to-month when it expires, you may only have to notify your tenant in writing that you’re increasing their rent.

Pro Tip

If you’re a smaller landlord considering raising the rates for the first time, it may feel like you’ll rock the boat with loyal tenants. Don’t worry. Get rental comparables and figure out if you’re charging rents above, at, or below market rates (based on the size, beds/baths, and condition of your rental property) to feel comfortable and confident raising the rent.

When can’t a landlord increase rent?

You cannot raise the rent as a landlord or owner under the following circumstances:

  • During an active lease
  • The lease agreement doesn’t allow for a rent increase
  • A rent increase notice wasn’t given properly
  • The property is rent-controlled
  • The rent increase is or can be seen as retaliation against a tenant
  • The rent increase meets the standard for discrimination against a tenant according to the Fair Housing Act
  • The rent increase is being done as a way to force a current tenant to move out
  • The rent increase is to a level prohibited by local law

How much can you increase rent?

The amount of rent that can be raised each year will depend on your state. For instance, in New York, property owners can increase the rent up to 3% upon renewal for a one-year lease. For a two-year lease, landlords can raise the rent up to 2.75% after the first year and 3.20% for the second year.

Rent increases may also depend on whether the tenant is new or renewing a lease. According to the Realtor.com March 2024 Rental Report, most landlords increase rent prices by 0% to 5% for renewals and 5% to 15% for new leases.

Final Thoughts

If your rental property is in a place where you can raise the rent, then your tenants will probably expect an increase each year. That said, it’s a good idea to make sure the lease mentions when and how much the rent will go up to avoid any surprises later on.

You can easily set up leases and collect rent payments, security deposits, and other fees all online with a free Baselane account. Plus, integrated banking and bookkeeping will help keep your finances organized, so you’ll know when it’s time for a rent increase.

Put rent collection on auto-pilot

Get paid on time with automated rent payments, reminders, and late fees.

Share this article:
Link Copied!
In this article:

Stress-free rent collection

Avatar photo
Financial Technology, Real Estate Investing, and Property Management, Accounting and Tax, Finance
Saad started his career as a Certified Public Accountant (CPA) working for a top-tier accounting firm. He was responsible for helping audit alternative investment funds. He later worked at a hedge fund where he was responsible for preparing financial statements and implementing new technology. He also ran a successful private tax practice for five years.

After completing his MBA at Duke, Saad joined The Boston Consulting Group to do management consulting. At BCG his experience spanned several industries and growth projects across Pharma, Retail, and Technology companies. His passion for democratizing finances led him to Plaid, a fintech, where he worked with large Banks and Financial Institutions to make finances and money easier for all.
Share this article:
Link Copied!
Preview
Baselane.com
When Should a Landlord Increase Rent