Is it worth increasing rent in the current real estate market? Most rental agreements have a clause that allows a landlord to raise the rent by a certain percentage during a specified period. If you want to take advantage of the inflated market right now, you have every right to do so. But, you need to weigh the pros and cons before making it official.
Average Rent in Salt Lake City
We’ve seen an unprecedented increase in rent and home values the last couple of years in Salt Lake City. As of February 2022, the average rent for an 835 square foot apartment was recorded as $1,562. The majority of apartments throughout the city rent between $1,001 and $1,500, with the next most common rent rate sitting between $1,501 and $2,000. While this may seem pretty steep, it’s actually below the national average.
Pros of Increasing Property Rent
Obviously, a pro of increasing the rent at your property is that you receive more money. If you haven’t yet paid off the mortgage for your rental, you can take advantage of raised rent to pay more toward the principal each month. But, what are some other specific benefits of increasing the rent?
Inflation is On Your Side
Take advantage of the increased value of homes and increase rent while the getting is good. Now is one of the best times to see if you can get more for your property because most renters are aware of the current trends. It’s expected that rents are high right now as so many people are relocating to Utah.
As a homeowner, it’s well within your right to charge rent that is between 1 and 2% of the overall property value. If your home has jumped from a $300,000 valuation to a $500,000 valuation, it makes sense to increase the rent to reflect that increase.
More Money for Improvements
Increasing the rent can be a win-win for both landlord and tenants. How? Well, the extra money collected can go toward upgrades to the property, giving your renters more amenities or nicer living conditions. Even if some of the money goes toward annual carpet cleaning, putting the money back into the property can show the tenants you care about them, which can soften the blow of the increased rents.
How to Increase the Rent at Your Property
It’s always best to refer to your specific rental agreement before making any changes to the rent at your property. However, even without a written agreement that rent may be increased at any time, a landlord may have the right to make an increase with written notice 15 days before the next month’s rent is due.
Whatever the case, remember that you’re operating a business. Back up the increase with data that supports your decision. Your property management company can present the information to your tenants so they can decide whether they’re going to vacate or renew.
Cons of Increasing Property Rent
You may end up losing your current tenants if you increase the rent when their lease is up for renewal. Not everyone receives cost-of-living raises, so they can’t afford to pay more for their rent.
Turnover
Is the turnover of tenants going to end up costing you more money than it’s worth to get new ones who can afford your increased rent? Make sure you crunch the numbers and ensure you’re not going to lose money having an empty property, marketing it for lease, and getting new tenants in place.
Unrealistic Expectations
If you haven’t kept your rental up to snuff with comparable properties, you’re probably setting your expectations too high. If you want to charge more for your rental, be sure its current condition reflects the increased rent.
Other costs to consider:
- Cleaning the property after it’s vacated
- Performing repairs after the property is vacated
- Updating appliances or fixtures so the property reflects the increased rent
Is the rate of increase enough to cover the expenses of turning over your property and doing maintenance to get it rent-ready again? It may end up being more cost-effective to continue renting at the current rate to avoid losing money on your property.
Thankfully, you don’t have to make this decision alone. With the help of Rhino Property Management, you can settle on a rent amount that is fair for both parties.