Raising the monthly rent on Boise investment properties is something every landlord will inevitably experience. In Boise, the common reasons why landlords raise the rent on their rental properties include:
- To increase their profits
- To accommodate tax increases
- To pay for maintenance or improvements
- To match market rates
The trick to raising the rent properly is doing so in a way that keeps vacancy rates low and limits turnover. Generally, most states have regulations on matters regarding rent, including raising the rent. If you are not familiar with these rules do your homework on the Idaho landlord-tenant laws.
If you are a landlord in Boise, here are the steps you should follow when raising the rent on your property.
Step One: Research the Boise Rental Market
This should be the first step prior to increasing rent. The goal of the research is to help you assess the prevailing rent price in order to avoid overcharging or undercharging your tenants.
Overcharging them is a recipe for complaints while undercharging them could result in lost wages.
Look at Boise rental advertisements. Talk to landlords who handle comparable properties and check the rent rate in your property area. You can also use online tools to help you find the price of rentals in your area. One such tool is Rentometer.
Step Two: Figure Out Your Reason for the Rent Increase
To keep the business profitable, you need to maintain a good cash flow. Having a positive cash flow means that your business is running smoothly. You should ultimately be earning more money than you are spending. Increasing rent may be the proper way to achieve that.
Before deciding on the rental price, factor in all your expenses. Such expenses include:
- Cost-of-living expenses
- Property management fees
- Insurance premiums
- HOA dues
- More utility expenses
- Property taxes
By factoring these overhead elements into your rent price, you will be able to charge the proper rent. Ideally, factor them into the rent during lease renewals or tenant turnovers.
Step Three: Determine How Much to Raise the Rent
According to SmartMove, landlords have the ability to influence rent prices as competition for rental housing rises. In addition, rents increased 12.5% over a six-year period, according to Zillow.
However, when considering an increase, be aware of Boise neighborhood rental rates as markets vary very much, even within the same area. That is why it is so important to do a comparative market analysis.
When properly done, the analysis will help you charge a competitive rent that will let you achieve top dollar. Aside from the profit, charging a competitive rent will also lower tenant turnover. Low tenant turnover means that you will be able to save on costs that you would otherwise have incurred marketing the property.
Depending on Boise’s market state, you should charge your renters 3-5% increase annually, at least according to Financial Samurai.
Consider the following if you do choose to raise rent prices:
- Your cash flow. Positive cash flow is necessary if you want to make a profit in the rental business. Ideally, the rent should be based on expenses. Sadly, it’s based on the market rate.
- Market rate in your area. If similar properties in the neighborhood where your property is located are increasing rent, then it’s a good indicator you should too.
- Local housing laws. Check to see that your rent increase is compliant with Boise rental laws and local limits.
Step Four: Decide the Appropriate Time for Increasing Rent
Your Boise lease agreement or state law will dictate when to increase rent. Boise rental laws do not specifically state how much notice you need to give prior to raising the rent.
You must give the renters 60 days’ notice when increasing the rent in Boise. For a month-to-month lease, you must give renters fifteen days notice. Again, no statute dictates the amount the rent can be increased.
The notice period gives the renters an opportunity to prepare for the increase and adjust their budget accordingly. You could also use this chance to incentivize them to extend their lease.
For example, you could give them a three percent raise if they agree to sign a new lease 60 days prior to the expiry of the existing one. Otherwise, inform them that it will increase by five percent.
By doing this, your tenants are less likely to complain and are more likely to renew their lease early.
Step Five: Provide Residents with a Rent Increase Notice
Last but not the least, inform your tenants of your intention to raise the rent. The communication should be clear and precise. It will help minimize incidences of conflicts.
Written communication is the best option. In fact, it may be a requirement under your lease agreement or under Boise landlord-tenant laws. In the rent increase letter make sure to:
- Ensure there is no room for negotiation or argument. Communicate the information as succinctly as possible.
- Leave no room for confusion. Cover all the necessary information.
In addition, you could also use this opportunity to remind tenants of your rent rules.
Red Flags in Raising Rent
It’s illegal under Boise’s rental laws to raise the rent because of retaliation or discrimination.
Landlord retaliation occurs when a landlord tries to force a tenant to leave because of exercising their rights. Such rights include the renter forming a rights group to better champion for tenant rights. Or, reporting the landlord to the local regulating agencies because of building code violations.
Whichever form it takes, landlord retaliation is illegal.
This is raising the rent in total disregard of the Federal Fair Housing Act. For example, raising rent shortly after discovering the tenant’s sexual orientation. Or, raising the rent drastically after discovering the tenant has a baby.
For a Boise landlord, rent increases are a normal part of doing business. Use these tips to successfully raise the rent on your Boise rental property. If you are still unsure of how to go about it or have specific questions, kindly consult a Boise property manager or attorney.