It’s almost spring and if you are a landlord then the question about when the right time to raise the rent on your property may be on your mind. We have heard how strong the rental market is in the Front Range, but how does that translate into what we do about our rental property? As a landlord, when is it the right time to raise the rent?
The general rule is that is if you have a good tenant then do not raise the rent. If they pay you on time and keep the house in decent condition then think twice before raising the rent. The biggest issue is this: Return On Investment [ROI]. If you raise the rent and the tenant moves out you then incur expenses to re-list the property such as make repairs so it can be shown and advertising the property. The cost of a transition can be large, but as a landlord my biggest concern is always losing a month’s rent.
A. Keeping your tenant at the same rent
If you currently rent your property for $1,200/month then your income is $14,400/year. If you like the tenant and they are easy to work with, pay rent on time, etc. then they may be worth keeping.
B. Raising the rent and losing your current tenant
If you raise the rent by $100 to $1,300/month you may lose your tenant. If you lose a month’s rent in the transition period, your annual income is $14,300. Not a huge difference from example A, but then you are dealing with a new tenant and not increasing your bottom line. Ultimately your ROI is down.
Maybe there is a way to create a win-win. Could the tenant take on additional responsibilities that are costing you now? Maybe they can mow the lawn, make some small repairs, etc… Many tenants are willing to do extra to ensure their rent does not increase. Either way, make sure you put all communications in writing including an increase in rent and give at least 30 days notice or more if you can. This will ultimately depend on how your lease is written and the laws in your area.
For details on how to handle landlord-tenant issues in the City of Boulder you can refer to the City of Boulder’s Landlord-Tenant Handbook.