Updated on January 13, 2022
Before you advertise your Seattle rental property, you want to make sure you set an ideal monthly rent rate to attract quality renters. However, when your rental price is too low, you lose money every month. On the other hand, if your monthly rent is set too high, you'll struggle to find residents who want to pay that much to live in your property.Setting the correct rate before you find a renter is easier than correcting it after you already have a resident in your property—but what can you do if you realize that you aren't charging enough rent every month?
Raising the rent is possible, but property owners need to follow some best practices to adjust the rent appropriately—while maintaining a good working relationship with their residents.
Avoid an expensive mistake! Learn more about your rent rate from an expert Seattle property management company.
When the Rent Is Too Low, Investors Lose
We mentioned that you lose money every month that your rental rate is too low—but what does that mean? When you're anxious to place a renter into your property, it can be tempting to lower the rent and hope your rental becomes more attractive. A resident paying "any" rent is better than not having a renter or any income at all—right?
Not really. Under-charging for a resident to live in your property means property owners lose in several ways.
- You're not generating enough income to have a profit at the end of the month. Does the rent check cover the monthly expenses for your property? If it doesn't, you're paying out of pocket for things like insurance, taxes, or HOA fees.
- You don't have enough cash flow for emergencies after covering your property's monthly expenses. What happens when the water heater breaks? Is it time for seasonal maintenance? If you don't have enough cash coming in from your rental property, you can't cover critical repair and upkeep costs.
- You don't have enough profit to build your long-term wealth. Why do you have an investment property? If you're not generating enough profit to support your long-term financial goals, you're losing money now—and later!
Under-pricing your Seattle property is never the right answer: don't sell yourself short—but don't overprice your property, either.
When the Rent Is Too High, Rental Property Investors Strike Out
When raising the rent, make sure you don't overcorrect and set it too high! If the rent is too high, you'll face the challenge of finding renters willing to pay that much to live in your property. When your property goes weeks (or months) without a resident, you lose just as much—if not more—as charging too little.
Are you frustrated yet? Don't worry. Thankfully, every investment property has an ideal rental rate. When you take the time and use the right tools to find the perfect monthly rental price, you can take steps to raise it appropriately and get your Seattle investment properties back on track!
Here are some tips from an expert Seattle property management company on how to pick rates for your properties.
Adjusting Appropriately Wins
There are plenty of reasons to raise the rent on your rental property. Every property has an ideal rental rate, and sometimes that needs to adjust for inflation or match the competition.
How can Seattle property investors know when it's time to raise the rent? When is the right time to raise it? Property managers suggest following a few best practices to help you understand how much—and when—to increase the rent.
- Your expenses increase. If your property taxes or insurance costs go up, it's appropriate to increase the rent to cover the increase in your expenses.
- Rental prices increase for similar homes. If everyone else is doing it in your area, it might be time to consider raising your rent, too. Don't settle for having the lowest-priced rental house in the neighborhood when you can still find plenty of renters for the correct rate!
- You made upgrades. If you've updated your property, you could justify a monthly rent increase—but only if they are amenities that your renters want. If you're unsure which updates are strategic, work with an expert Seattle property management company to pick winning upgrades.
Make sure you keep an eye on the rental market and your expenses: don't let your profits suffer!
How Much—and How Soon—Can Investors Raise the Rent?
There are a few key things landlords can do to determine how much they should raise the rent. Let's take a look at five things rental property owners should consider when looking at how much and how soon to raise their rent prices.
- Get to know your renters. Landlords should be familiar with their tenants to approach the topic of rent increases in the least harmful way possible. When tenants know their landlord, they are more likely to see the rent increase coming from a person they can talk to about the reasons.
- Get to know Washington laws. When it comes to increasing rent, there are legal limits that landlords and property owners need to be aware of. Making sure rent is increased lawfully is essential, as it can help ensure both the landlord and tenant are treated fairly. Become familiar with the Washington laws regarding landlord-tenant relationships. If you don't know, work with a real estate attorney or a professional property management company to keep you in compliance.
- Communicate the reasons for the increase to your tenants. When increasing the rent on a tenant, there should be documented reasons for why the increase is needed. Providing a letter outlining the financial or market changes that justify the increase is best practice. This will ensure that your tenants understand why the rent increase is necessary, and it will also help to protect you in case of any disputes.
- Answer any questions and address feedback from renters. When considering whether or not to raise the rent on your tenants, it is essential to remember that they may have many questions. Being there to answer them and humanize the rent increase makes it more likely that they will accept it. Explaining why the rent needs to go up can help them understand and make them more likely to work with you.
- Give your renters stability. When raising the rent, it is crucial to do so in a way that does not cause tenants to leave. One way to ensure this is by promising no further rent increases for a set period. This will help tenants feel more secure in their living situation and less likely to move.
As a property management company in Seattle, we often advise our clients on how to increase rent. In many cases, a rent increase is unavoidable and necessary due to various reasons. However, it's important to remember that you can increase rent without losing tenants—as long as you're open about the process and willing to share information with your tenants. By approaching the increase in a professional and organized way, tenants are far less likely to react badly.
When thinking about raising the rent and you have communicated with the renter that an increase is coming, there are a few more items to keep in mind.
- When it's time to raise the rent, do so in moderation: a significant increase out of the blue might encourage your renters to leave.
- Incremental increases when it's time to renew the lease are standard; most renters expect a slight increase in the rent at lease renewal.
- Be sure to inform your residents of the rate increase! Alert them in writing 90 days before the new lease term when the higher rate takes effect.
The question of "How much?" is harder to answer and dependent on significant market research. Fortunately, investors have an ally in their pricing: turn to a property management company in Seattle!
Seattle Property Management Experts Helps Investors Raise Rents (and Keep Tenants)
If you don't know what's happening in the Seattle rental market—or you're not sure how much to adjust the rent—working with a property management company in Seattle is a great way to get a leg up on the competition. Instead of conducting market research on each of your investment properties, your property management partner will run the numbers for you to find the best rate!
Real Property Associates provides our powerful rental analysis for FREE to our investors: we know that your success is our success, too! Our rental analysis evaluates your investment properties and rental market conditions in Seattle. If we discover that you need to raise the rent, we apply our best practices developed as a property management company in Seattle. We work with your residents to normalize your rate increase and reduce vacancy.
So, do you know if your rental rate is too low for your Seattle investment properties? Take advantage of our FREE rental analysis to find out!