Rent Increase Letter Guide 

As a landlord, one of the more uncomfortable responsibilities you’ll oversee is informing tenants about increases in monthly rent. This news is generally upsetting for tenants, especially those on a tight budget or who are already struggling with rent costs as they are, so it’s vital to handle this task with care—but where should you start? 

Before you begin drafting a landlord rent increase letter to tenants, it’s important to understand why you might want to increase rent and what considerations you should give thought to first. In this article, we’ll walk you through everything you need to know about rent increase letters, including a letter to raise rent example and a breakdown of crucial information to include. 

Reasons You May Want to Increase Rent 

Let’s start with the basics: Why might you want to raise rent for your tenants?  

Raising rent may seem like an attractive idea, especially since rent is your biggest source of income as a landlord. It can be a great way to maintain or increase your earnings, but you should always have a reason to initiate a rent hike before you put it into motion—being fair and honest with your tenants is a top priority. Let’s look at a couple of reasons why increasing rent may be a good idea for your rental business. 

Improvements to The Unit or Building 

Whether you own one unit or an entire building, making improvements to your property often justifies an increase in rent. Imagine you’ve renovated an apartment with new flooring or countertops, upgraded appliances, or even an add-on room. As the improvements and changes you make increase the value of your unit, your rent should increase to reflect that value. 

The same thing goes for renovating an apartment building, too. If you’ve spent time and funds on installing new equipment in the gym, adding a café to the lobby, or increasing the number of spots in the building’s parking lot, the value of the amenities goes up. Your rent should mirror this increase in value (and it can help cover expenses you’ve incurred while renovating).  

Inflation and Property Taxes 

Some expenses are simply out of your control as a landlord or property manager, no matter how well you plan and budget. If property taxes, insurance rates, or inflation increase and begin to affect your business, you may not be able to maintain your current income. This means that without a rent increase, you lose both money and flexibility in running your rental business. 

Important Considerations Before Increasing Rent 

Of course, this doesn’t mean increasing rent whenever and for whatever reason you want. Your circumstances may not always support a rent increase, so it’s important to look over a few considerations before taking action on raising the rent for your residents. Ask yourself the following questions to help yourself decide whether a rent increase is the right choice for you:

1. Does your local market support an increase?

One of the first things you should do when considering a rent increase is research the rental market in your area to see if the rent pricing around you is comparable to what you currently charge. For example, if the average rent price in your area is $2,000 a month and you charge $1,800 a month, your pricing can be seen as competitive and may not benefit from an increase.  

However, the opposite is also true—if the average rent price in your area is $2,000 a month and you only charge $1,200 a month, a rent increase can bring your business up to the level of other landlords while increasing your monthly earnings, helping you sustain your business in your local market. Keep in mind, though, that this is just one of several factors you should be considering when making a decision about a rent hike.

2. Does the state of your units support it?

The state of your units might also impact the decision of whether you should raise rent for your tenants. As mentioned above, if you’ve made significant improvements to your units or your building, their value has likely increased, and your rent prices should, too.  

It’s important, though, to consider the opposite: Rental units that could use repairs or updating. If the flooring is worn, appliances are ancient, or if anything is broken, a rent increase for unit value can’t reasonably be justified. It’s best to begin with repairs and renovations before charging your tenants a higher price to live on your property.

3. Is a tenant’s lease about to end?

If a tenant has been living in your unit for ten months, but their lease is up in two months, it may be a good strategy to wait for a tenant to move out before making changes to your rent pricing. This way, you won’t be obligated to send a rent increase letter that will upset your current tenant (or even push them away) at the end of their lease and you can simply begin advertising a higher price to new tenants who haven’t already been paying a lower amount each month.

4. Can your tenants reasonably handle a rent hike?

There are many important factors that go into increasing your rent, but at the end of the day you should always be thinking of your tenants. Will a rent increase be something that your tenants can reasonably handle, or will the financial impact be too large for them to continue living in your unit? The last thing you want to do is push good tenants away, so if you know your tenants are on a fixed income or tight budget, consider the effects of a rent increase on not only your finances, but their finances, too.

5. Are there legal obligations or regulations you need to follow?

From a legal standpoint, rent increases are not always in your control. Some states require a certain amount of notice before a rent increase is issued, several states and cities have rent control laws that regulate the amount the rent can be raised within a certain period, and in others written notice can even be required.  

Every state is different, though. For example, Ohio has no statutes for rent control at all, while New York requires notice and can cap rent increases. Be sure to look into your state’s rules before you move forward with raising rent so that you comply with both local and federal laws. 

How to Approach Tenants with a Rent Increase 

Now that you have a background for rent increases, how should you approach your tenants about them? Writing a rent increase letter can be stressful and confusing if you don’t know where to begin. Follow these tips about things you should include in a rent increase letter to ensure that tenants understand exactly what your steps are and why. 

• Begin with the date, address, and name. Your letter should include the date it was written, the property address the letter is for, and the name of the tenant receiving the letter. 

• Include rent amount and start date. Obviously, one of the most important parts of a rent increase letter to include is the amount the rent is increasing (usually between 3% and 5%) as well as when it goes into effect (usually at the beginning of a new lease). Be specific and clear with these numbers so tenants know exactly what to expect. 

• State the reason. Many states don’t require you to give a reason for raising the monthly rent amount, but transparency is a courtesy that tenants will appreciate and will help them understand what their money is going towards. 

• Be empathetic. In addition to being professional, empathy will go a long way with your tenants and their reaction to this not-so-good news. This is a good moment to be understanding while also explaining why you think the rent increase is justified or fair. 

• Encourage further communication if needed. Of course, as a landlord, you likely want to foster a space for open communication. Your friendly rent increase letter is a good place to encourage further communication if a tenant has any questions or concerns they’d like to talk to you about regarding their rent. 

• End with your signature. This not only confirms who the letter is from, but a handwritten signature adds authenticity to the letter. 

• Send it in advance. Again, some states require notice to be sent in advance, but even if your state has no regulations, sending a rent increase notice in advance is always a good choice so tenants have time to financially prepare for the change. 

A rent increase letter doesn’t have to sound robotic; your honesty and voice will add authenticity to whatever you ultimately send. If writing isn’t your strong suit though, don’t worry—we have a rent increase letter sample letter you can modify or add to before sending to tenants. 

Conclusion 

No landlord enjoys telling a tenant about a rent increase, but it’s a necessary part of being a landlord or property manager. Your best approach is to remain empathetic, clear, and open to communication with your tenants to guarantee their understanding of your reasoning for raising the rent. 

With a new understanding of when and why to increase rent, as well as how to inform your tenants about it with sensitivity and kindness, you’ll be well-equipped to take on the task of writing a friendly rent increase letter.