Published by Entrepreneur.com | November 12, 2024
Landlords can increase revenue without raising rent prices by minimizing tenant turnover, offering online rent payments for convenience, and adding reasonable fees.
It may seem obvious, but raising rent and determining rent pricing strategically is an easy way to increase your rental revenue each month. However, setting the rent price isn’t that easy. Raising rent without doing the proper preparation and market research will chase away potential tenants, and you’ll be worse off than you started.
Here are a few tips to raise your rent prices and some alternatives that will increase your revenue as well.
Conduct research
Understanding the market is a surefire way to ethically and accurately raise rent prices. Without getting a feel for the competition, it can be easy to overprice or underprice your property — you could either scare away potential tenants with your lofty price tag or miss out on more income if you price the unit too low.
When setting a rental price, you must justify it with data collected from your neighborhood and determine a rent-to-value ratio using comparable properties in the market. Market rent is the expected amount of rent that your property can generate each month. This metric is based on various factors like location, amenities, the condition of the unit and the rent price being charged by comparable properties in the area, called comps.
Compare average rent prices when considering these properties. Comps are a landlord’s best friend when justifying a rent increase. They can help you understand where your property’s price fits in with the overall market and can point out potential improvements you can make to your unit to allow for an increase in rental income.
For example, if there is a unit across the street that charges $200 more a month than yours, find out why. Does it have nicer flooring or appliances? Do they include certain utilities like gas or water in their rent? Once you’ve identified these differences, you can weigh the cost-benefit analysis of doing renovations and charging more or keeping your unit priced as-is.
While you can always charge more without doing these renovations, it is important to keep in mind that renters are also doing market analysis while shopping for a new place. If you are pricing your unit significantly above market rate, buyers will most likely not even want to tour and give it a chance to justify that higher rate. If you charge a premium price, be prepared to provide premium amenities and features.
