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Why You Need A Custom Rent Increase Letter For Your Tenant

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Rent increase letter for raising your rentIf you plan on sending a rent increase letter to a tenant you need to understand how this can play out.

If you have a standard form letter announcing a rent increase you may get your monthly bump in cash flow, but at the expense of creating a long term relationship.  And long term relationships are one of the secrets of stress free landlording!

Think about it, when you get a form letter in the mail does it bring a smile to your face, or is it so impersonal you simply ignore it or worse build up negative feelings. I’m guessing even if you do ignore it deep down your subconscious is still feeling like you’re just another number in the system.

What if instead of a form letter you instead received a personalized letter. One that addresses you, your potential concerns and perhaps doesn’t have your name in a different font! How would that make you feel?

Well that’s the reason for creating a customized rent increase letter for any tenants facing a potential rent increase. But it’s not just a matter of customizing it.

You also need to position it! Now I go much more in depth about positioning in a previous article about raising rents and you can go check it out here, Raising Your Rents Without Raising The Roof (I also provide a sample rent increase letter you can look at).

The quick lesson about positioning is you have to make sure your tenants know you value them and that you’re not just randomly raising rents, but rather that you have expenses to cover as well.

Expenses like ever increasing property taxes, skyrocketing insurance rates and bank fee after bank fee. While they’re not a huge deal if they trickle in, after a couple years they can put a significant dent in your cash flow, and you’re already taking the risk of being a landlord so these costs need to be passed onto the tenants.

Just to be clear, I’m not talking about doubling your rents either. There is a fair and positive way to increase your rents and you need to understand that it starts with your rent increase letter.

If you haven’t gone to take a look at that earlier article yet I’d suggest you go take a look and get started on your rent increase letter sooner rather than later.

One last thing, make sure you understand local rules about rent increases. This can include how much you may be allowed to raise rents, how often you can raise rents and how much notice is required for a rent increase.

If you have any questions or feedback, leave me a comment below!

 

Why Are Landlords So Stupid?

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Why Landlords Don’t Think Properly

don't be stupid landlordsDon’t worry I don’t get a free pass on this either! I’m just as guilty at times as other landlords and because I know all this, it actually makes it worse!

Example, tenant tells us on the first they will be a couple days late, so what do we do? They have some good history with us, we have a good relationship, so we say that’s fine, thanks for notifying me, let’s just get this resolved by the 4th.

The problem is we have set a dangerous precedent. They are going to be late, there are no repercussions to them and they now know if something comes up in the future, all it takes is a call to get a few extra days.

What we should have done is read the riot act, within reason, explained how the bank won’t accept a note from my tenant in lieu of actual cash money and that this cannot happen again. Then follow it up with a letter going over all of this again as a reminder and for their tenant file, in case anything comes up again.

It’s not that we’re jerks that we need to do stuff like this, it’s because of human nature. We have to remember to protect ourselves and our assets, but we don’t think properly. We think stupidly.

We tend to worry that we will upset the tenants, so we play nice. Which while being kind hearted, is actually stupid, because tenants understand costs rise. Which brings me to the next area of landlord stupidity.

Why Won’t We Raise Rents?

Again, no free pass for me as I don’t always do this either, and it comes back and bites me as well.

Even if we don’t raise our rents on a yearly basis, our costs still go up, don’t they?

Maybe right now we are getting a break on mortgage costs as rates are still so low, but as I look back over the last ten years I am definitely paying more for taxes, my insurance has not gone done on any property and utilities, labor costs and general costs of business have also definitely risen.

Yet we (I’m generalizing all landlords here) are afraid of passing these costs onto our tenants. Sure we’ll increase rents if tenants leave and we sure as heck drop them if the market slows down, but why do we give longer term tenants a free pass?

Landlords Action Steps

One of my goals with this site is to make you a better landlord. The articles I write, the stories I tell, the intent is to teach you, to educate you and to help you avoid mistakes I made or that I see so often from other landlords. It’s also to help make you more profitable.

So here’s an action step for you. Let’s call it a challenge even. If you’ve owned your rental property for  at least two years, and haven’t raised your rents, take a look back through your taxes, through your insurance and through any other costs that you may be incurring for your property. Have they gone up?

If they have, have you passed the costs onto the tenants? If you haven’t, your action step is to learn your local rules for rent increases and determine if you can raise your rent to cover your costs at the very least.

You may be handcuffed by local landlord laws covering rent increases, locally here I can only raise the rent once every 365 days. So if I just signed the tenant up six months ago, I cannot pass on an increase for six more months.

You may be handcuffed by timelines, locally I have to provide 90 days notice which includes three full months for a rent increase. Since today is the fourth of March, I cannot pass a rent increase on to a tenant now  until July 1st.

You’ll need to learn if there are any restrictions like these or worse rent controls restricting or guiding you as to how, when and how much you can increase your rents. Start looking into these today and next article I’ll explain how to write your rent increase letter to make you look like an awesome landlord while at the same time you’re increasing the rent!

Final Thought

I understand that some regions of the country have higher vacancy rates and raising your rent just causes tenants to jump ship, but a reasonable increase to cover your costs rarely causes a good tenant to leave.

Think about this, you’re providing a safe secure home for someone and you’re taking all the risk of covering the payments, being able to qualify to even purchase a property and long term hopefully using it as a retirement vehicle. You should be able to pass the rising costs onto your tenants who have the ability to leave in a year, who don’t have to qualify for a mortgage and who fall back to you if a fridge or stove breaks.

$25, $50 or even $100 a month helps you cover increases, provides you more cushion if something does go wrong and helps make your business just a little more profitable. So take that action step to determine if you need to raise the rent and the process/timeline for you to follow.