There are several reasons for landlords to raise the rent of their properties. In some cases, the reasons are valid and some are not. However, landlords can not raise the rent whenever they want and how much they want. Especially, a landlord can’t increase the price during a contract. The rental fee can be changed only after the contract period ends. For more information, see how to raise rent as a landlord.
In this post, I will discuss the main reasons for landlords to raise the rent, what are valid reasons, what are considered as not valid or logical, etc. When discussing the reasons, I highly focused on the residential apartments & homes for living.
Let’s get started.
Reasons for rent increase
Tenants want to live in the best quality apartments at the lowest cost possible. On the other hand, landlords don’t want to drop the property value.
Increasing the rent is never good news to the tenants. Believe it or not, it’s also not very pleasant for the landlords as well.
However, there are some changes to the situations & circumstances when the landlords have no ways other than increasing the rent.
As a property maintenance company, we discovered many reasons in the real-life working experience. Below I explained the main reasons why landlords raise the rent.
Increase in the operating cost
It’s common for landlords to consider raising rent if operating costs increase. Property maintenance, repairs, property taxes, insurance, utilities, and other day-to-day expenses are some of the examples. If these costs rise, landlords will find it necessary to adjust the rent.
Think of the rental properties are a business. Even many of them have mortgages. So the landlords will indeed try to maintain profitability and cover those increased expenses.
However, the ability to raise rent is governed by local laws (even though it can be bypassed sometimes). Some areas have limited the amount and frequency. For example how much and how often landlords can increase rent.
Tenants should know their rights and understand the lease agreement.
Improving or renovating the property
Landlords often raise rents after making significant improvements or renovations to a rental property. When landlords invest in upgrading the property, they aim to increase its value and attractiveness to potential tenants.
Here are some examples of the improvements & renovations:
- Kitchen or bathroom renovations
- Adding new appliances or amenities
- Installing energy-efficient features
- Updating flooring or paint
- Enhancing security features
- Expanding or improving common areas
- Lawn and landscaping, etc.
After making any of these improvements, landlords may raise the rent to reflect the increased value. Some of the landlords may not raise the price immediately but they will do after the current contract ends. It also depends on the relationships & mentality.
Increase in the living cost
An increase in the overall living cost in a particular area is a big factor in raising rents. The cost of living includes various expenses such as:
- Food & groceries
- Transportation
- Healthcare
- Taxes
- Education
- Utilities such as electricity, gas, water, internet, etc.
If the general cost of living rises, landlords may also adjust rents to keep pace with the increased living expenses.
Aside from the local laws that I mentioned earlier, some landlords may try to bypass the rules & regulations if the living cost goes too high for any reason. They may either try to increase the rent during the contract period or limit the benefits & usablities.
Positive changes in the society & market demand
Improvements in infrastructure, increased job opportunities, enhanced public services, improvements in social security, transportation, roads, or other developments that contribute to a better quality of life may also increase the chance of raising the rent.
When such improvements are visible in an area, the market demand will increase for that particular area. More people will be attracted to live & do business in that area. This is how positive changes can increase the market demand and it can raise the rent.
In the same vein, the opposite is also true. For example, if an area is not secure, and has difficulties with transportation, this will decrease the market demand and the rent will be lower in such places.
Inflation
Inflation is an economic term that you may already know about. It’s also a reason for raising the rent. It raises the prices of goods and decreases the power of buying.
When inflation occurs, operating costs for rental properties also rise. Not to mention, the property owners also have to buy everything at a higher price just like the tenants.
So it’s obvious to increase the rent if inflation occurs.
However, as a property maintenance company, we noticed that rent prices did not increase during the recession period. During this period, many people face financial challenges. Increasing rents during recessions also increases higher vacancy rates.
Security or deposit money
The security money refers to the refundable & initial deposit before entering the house. The amount of security money is generally equivalent to 2/3 months of rent. For example, if the monthly rent is $1500, the security money could be ($1500 x 2 months) = $3000.
There are various reasons for depositing the security money. As the name suggests, it’s for security. Here are some reasons for taking the security money:
- It works as a financial protection for the landlords.
- If a tenant damages a certain thing, the landlord can adjust the security money.
- If the tenant fails to pay rent for one or two months, the landlord can adjust the rent from the security money.
- If a tenant intentionally disappears without paying rent, the landlord can cover it.
However, aside from the purposes mentioned above, a few landlords may also try to take a higher amount of security money as much as they can. So they can invest the money in their business and solve other problems. And the amount is not always equal to two or three months.
As a property maintenance contractor, we saw that some landlords prefer to accept a higher amount of security money with a lower monthly rent. Some others prefer to take a reasonable security money with the higher rent possible. From this observation, the amount of security money is also a factor for raising or declining the rent.
Bad relationships between tenant & landlord
This reason may seem funny or confusing or you may be wondering. But it’s also a reason for raising the rent. It’s very rare but we noticed & experienced this type of rent increase.
As a property maintenance contractor, we have to deal with various types of landlords and tenants. If a landlord does not want a certain tenant to stay in his apartment, the landlord may want to increase the rent to an unaffordable amount. So the tenant leaves the home or apartment on his own.
How can a property management company help both the tenant & landlord?
A tenant will try to live in an apartment with the lowest price possible. At the same time, they will expect to have the highest quality & benefits.
On the other hand, a landlord will try to get the highest rent and spend less on maintenance.
Both parties are correct and their expectations are valid. However, their expectations generally conflict and various issues arise.
A property management company or contractor is a middleman between the tenant & landlord. A contractor can work as a bridge between the gap or solve the issues and eliminate the conflicts among expectations.
If you have no idea about a property management company, see another post to get a clear concept. From contract creation to rent collection, a property maintenance company does everything in between.
This is a win-win for both the tenant & the landlord. Both parties can stay on the safe side.
If you rent an apartment through a property maintenance company, you don’t have to worry about an uncertain raise in the rent. On the other hand, if you’re a landlord, you don’t have to worry about collecting the rent on time. Even, you don’t have to worry about unwanted vacancies. Because the property maintenance company pays the landlords even if the apartment is vacant. However, sometimes the contractor receives a waiver for certain cases.
Wrap up
In this post, I explained the topmost reasons for landlords to raise the rents. Also, I revealed a secret reason that no one tells you.
I also explained how a tenant or landlord can avoid all the hassles, become tension-free, and get the highest value for their money & property.
Every state in the US has its local laws & regulations for raising the rent. However, you also have to take the contract between the tenant and landlord into consideration (as well as other factors mentioned in this post).
Aside from the local laws & contracts, good relationships, mentality & attitude also play a vital role in a better quality living.
