As a rental property owner, one of the smartest choices you make every year is whether or not to raise the rent upon lease renewal. It may make you feel uncomfortable, particularly if they’re a good tenant. But in the current market, smart rent increases are not only safe, they’re necessary.
Here are some reasons why raising rent at renewal matters, how to do it responsibly, and why rental caps make timely increases essential.
Is it safe to raise the rent?
Yes, you can legally and safely raise rent when renewing a lease. Just make sure to follow state rules and give proper notice. Landlords in Washington, for instance, are required to provide at least 90 days’ written notice of a rent hike.
It’s important to note that you generally can’t raise rent during a lease. But at renewal, you have the right to change the rate. So at Zenith Properties, we keep a close eye on rent control laws so that all rent increases are compliant and reasonable.
How much can a landlord increase rent?
Due to Washington state’s new law, House Bill 1217, rent increases are capped at a certain amount. So you can increase the rent by 10% or 7% plus inflation, whichever is lower.
However, large increases can result in vacancy periods and turnover costs. These expenses can cut into any extra revenue that could be going into your pocket.
Read more about WA House Bill 1217 and how it impacts landlords here.
So how much should rent be increased per year?
We suggest raising rates by 3-5% each year at renewal. This often aligns with inflation and rising operational costs.
However, the exact or perfect amount depends on several factors, such as current market rates in your area, the condition of your property, and how your current rent compares to similar properties nearby.
How often should rent increase?
Annual rent increases at lease renewal have become the industry standard, and for good reason. This regular schedule allows tenants to budget better while helping your income increase over time.
Waiting years between rent hikes can mean larger increases later. This can catch tenants off guard and may lead to more move-outs.
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Why You Should Raise Rent at Renewal
Small raises add up in the long run and benefit you by:
1. Staying Current with Market Rates
If you haven’t raised rent in the past 1-2 years, your rate is likely lower than the market. That means you’re leaving money on the table, frequently hundreds or thousands annually.
If you find a vacancy during a slow market (like in December), you might need to lower your rental rate to attract tenants. Small, steady increases help keep tenants and maintain market value. This is the key balancing act.
2. Balance Rising Expenses
From insurance and taxes to upkeep and inflation, your expenses have probably risen. A fair rent increase keeps your investment profitable.
3. Don’t Fall Behind Future Caps
As mentioned above, Washington State now has annual rent hike limits. If you miss or postpone increases currently, you may not be able to raise rent subsequently because of capped rates. You can only increase rental rates every 12 months, which is why lease renewal is the crucial time to do it.
Take note: You cannot “catch up” with rates higher than 10% on late increases later if you let the window pass this year.
How to Raise Rent Without Losing Good Tenants
Most responsible tenants can appreciate that rent rises are a natural part of long-term renting. But if you’re concerned that a rent increase will push renters out, here’s how to do it correctly:
- Be in the market range. Avoid big jumps. Moderate increases based on data are seen as reasonable and are usually accepted.
- Provide good notice. Inform tenants in advance, so they can plan ahead, using the 90-day written notice rule as a baseline.
- Offer concessions. Providing up-front concessions like “$200 off next month’s rent” is a great strategy to increase rent and retain a tenant. There are a lot of creative ways to incentivize them, such as offering a free carpet cleaning. This gives the tenant a perk and takes care of your property’s carpets. It’s a win-win!
- Show value. A professional property management company offers great service for maintenance repairs, easy rent payment, and home care. As a result, tenants will recognize the value of the increase.
We’ll Manage Your Rent Renewals
Rent rises at renewal aren’t about being tough, it’s about keeping your investment safe and in line with the market. Now that rental caps are in place, the top priorities are keeping rent increases small and holding on to good tenants.
Raising the rent a little over time helps you maintain a steady income. This way, you can cover rising expenses and avoid falling behind in the future.
Zenith Properties can help you determine the optimal rent increase for your property. We stay compliant with the law when choosing the right time to raise rent, and we make sure to communicate the increase clearly to your tenants.
Reach out to us today for a free rent analysis or lease renewal strategy session.