How To Raise Rent in San Diego
Rental properties can have several uses for a portfolio but the most important one is income. If your property isn’t earning a solid income compared to its value then you aren’t managing your investment wisely.
When it comes time to sell, the amount of income produced by rent has a direct relation to the value of the property. A property that collects a higher rent has a higher value, so if you’ve had tenants in the property for 15 years paying the same rent its likely your rent is well below market and it will negatively affect your properties value.
So, how do we go about correcting this issue? Make your asset perform better.
Here are the four steps to get it done.
Determine Market Rent
First go to craigslist and get a feel for what the market rent is in the area, you can also ask tenants and landlords of nearby houses or buildings. Once you have a base line for how much the current market rent is compared to what you charge you can move forward.
Determine Standard Condition of the Competition
Next up is addressing the current condition of your property. You cannot get market rent if your property is outdated or unsafe. Most importantly, all safety items in a rental MUST be addressed frequently. Take a good look at the other properties available for rent on craigslist and by driving the area. How does your property match up? Landscaping, kitchen, bathrooms, windows, HVAC, appliances all must be equal and it good working order.
Repair and Upgrade Property to Market Conditions
Address those items that put your property on the low end in your market. Items that are broken or damaged, not working properly etc. I know many landlords will tolerate low rents in exchange for not maintaining their properties well but this is a risky move. A property will quickly fall into disrepair; certain items can cause long term damage to property if ignored and let’s just be honest. No one should be a slum lord.
Create a want and need list, budget out all of the need items and get them handled. If you feel it is within your range to tackle a few wants on the list too then go ahead. Just remember the goal is to be equal to the competition. Tenants won’t move if their rent is equal to the market rate and the condition of the property is equal to the competition.
I always try to be $25.00 – $50.00 under the competition when I raise the rent. Should my tenants be upset that I’ve raised the rent they will look on craigslist and see that their place is actually a better deal. They won’t relocate and pay more for rent, the condition of the properties are equal.
I try my best to be professional and courteous with my tenants at all times. There would be no reason to leave since it would cost them more to live elsewhere. For example in one case the rental was several hundred dollars a month below market rent. By law I needed to give 60 days notice to increase the rent. Instead I gave the tenant 90 days to help them better prepare their budget. Little things like this can go a long way in building a strong relationship with your tenants.
The goal here isn’t to charge an unfair amount for rent, it is to offer a clean and safe property for your tenants at a fair price. This ensures your asset is performing well and you aren’t letting your investment fall into disrepair by not maintaining it properly.
Then, when it comes time to sell you will reap the benefits of having a well maintained rental collecting market rents. If not, prepare to take a discount for your property.