How much is too much? How little is too little? Raising the rent can feel like walking a tightrope. Go too high, and you risk pushing your tenant out the door. Go too low, or not at all, and your rental income won’t keep up with rising expenses. So, what’s the right move? How do you strike a balance between profitability and keeping your property occupied? Let’s break it down in a way that makes sense (and won’t send your tenants packing).
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Why Should You Increase Rent Every Year?
Simply, owning a rental property is a business. And like any business, expenses grow over time. You’ll eventually lose money if you don’t adjust your rental rates to keep up. Here are some costs that tend to rise whether you like it or not:
- Property taxes – The city isn’t sending you a discount anytime soon.
- HOA fees – These can (and usually do) creep up annually.
- Insurance premiums – You need coverage, and costs are rising.
- Maintenance and repairs – From fixing leaky faucets to replacing appliances, everything adds up.
- Property management fees – If you work with a property manager (which can make your life much easier), their fees may adjust annually, too.
If you let these expenses outpace your rental income, your profits shrink. That’s why a slight, steady rent increase is often the best way to sustain your investment.
How Much Should You Raise Rent Each Year?
A good rule of thumb? 3% to 5% per year. This range is standard in many markets, but before you decide, take a moment to:
- Check your local laws – Some states and cities have rent control or limits on how much you can increase annually.
- Look at the competition – Compare similar rentals in your area. If they’re all charging more, you might be underpricing your unit.
- Consider tenant retention – If you have a great tenant who always pays on time, keeping increases modest might encourage them to stay longer.
A big mistake? Raising rent too much, too fast. Imagine your tenant pays $1,200 per month, and you bump it to $1,500. That’s a 25% jump; enough to send most renters searching for a new place. Instead, a $40 to $60 yearly increase is much more digestible.
How Property Managers Can Help
How much to raise the rent? According to AustinVestors, a property manager can do the heavy lifting and help you with the whole process. They analyze rental comps, track market trends, and ensure your increases stay competitive yet reasonable. Plus, they handle lease negotiations so you don’t have to have those awkward conversations with tenants about money.
When You Can’t Raise the Rent
Before increasing rent, make sure you’re legally allowed to do so. Here’s when you can’t raise rent:
- Mid-lease – If your tenant signed a fixed-term lease (e.g., a 12-month lease), you must wait until renewal.
- Rent-controlled areas – Some cities limit how much you can increase annually.
- Improper notice – Most states require you to notify tenants at least 30 to 60 days before increasing rent.
What If You Don’t Want to Raise Rent?
You might hesitate to raise the rent if you love your tenants and want to keep them happy. That’s okay! But instead of skipping an increase altogether, consider alternative ways to boost income:
- Add pet rent – Charge an extra $25-$50 per month for tenants with pets.
- Offer premium amenities – Think valet trash, covered parking, or upgraded appliances for a small fee.
- Furnished options – If your market supports it, offering a fully furnished unit can justify a higher rent.
Still, when that tenant eventually moves out, reset the rent to market rate so you’re not leaving money on the table.
How to Announce a Rent Increase
Decided to raise the rent? Here’s how to do it right:
- Give plenty of notice – At least 60 days before lease renewal (or as required by law).
- Justify the increase – Explain rising costs in a professional, transparent way.
- Offer a renewal option – Give them a clear path to stay if they agree to the new rate.
If you work with a property manager, they can handle this process smoothly and ensure that all communications are transparent and legally compliant. You can find more info about this on this website.
FAQs
How much can I legally raise rent?
Check your local and state laws. Some areas have rent control laws that limit increases, while others allow landlords to raise rents freely (within reason).
What’s the national average rent increase per year?
Typically, 3% to 5% varies by market conditions.
Can I increase the rent mid-lease?
No. If a tenant has a fixed-term lease, you must wait until renewal unless the lease allows explicitly for mid-term increases.
Final Thoughts
Raising the rent doesn’t mean you are being greedy. It is necessary to do so to keep your rental property financially viable. A reasonable yearly increase helps cover costs, keeps you competitive, and ensures your property remains a solid investment. And if you’re unsure about the process, property managers can help with market analysis and lease negotiations. They simply take the stress off your plate.
So, how much should you raise the rent this year? Now, you have the tools to make the right call.