Rent Increases

Well, rumor has it we are due for some great rent increases this year. While this is great for us, we know it's not fun sending out those rent increase letters! Do you send out your increase letters before the required notice date or wait until last minute? In WA we have to give 30 days notice of increase, but a resident only has to give 20 days notice to move out. 20 days is not much time to re-rent an apartment, so I would prefer to know further in advance when someone is planning on moving out. On the flip side, if I wait until the 30 days to give notice then it only gives them 10 days to make a decision, which isn't much time to look around for a new place and more likely they will just renew?

The good news is that a certain percentage will renew because it is the path of least resistance. However, you will have a vocal percentage that will search your competitors to see if you are being fair (and tell you about it!) If you would like to have more time to re-rent an apartment—and feel you can do it at the higher rate, by all means, give your current residents more time. Frame this as a courteous customer-service-oriented action on your part. This does give them time to look for something else but it also allows you the opportunity to open up a dialogue regarding their plans. You will get some notices early and have the ability to increase your revenues because you are renting at higher rates.

This is a tough conversation regardless of the increase amount. You and your team just need to feel confident in your prices.

One thing we have done successfully when dealing with tight notice windows is offer two prices. One price if people renew at 60 days (or even further out) and a different rate for 30 days out. Even the 60 day should be a good increase, but make the 30 day bigger. When people have to choose between the two they realize the price is going up regardless and it puts less pressure on that issue.

Of course, if you have the option to make your notice period 60 days I highly recommend that. Best of luck.

Great suggestion this gives tenants a better cause to action. In general we have had little trouble with 30 day notices, but this certainly is a better idea.

Mark,

I currently use that same method of offering two different prices and putting the notices out sooner with hopes of not having to wait to find out if people are moving. However, with bigger increases this year, I am more nervous about my vulnerability in exposing the higher rates so early. I have made my increases quite aggressive. While I think they are attainable rates, I will definitely have to work for them as not everybody will be willing to pay so much, especially if neighboring properties fall asleep at the opportunity to raise rents right now.

What's considered "bigger" to you? We were getting $50-100 increases last year at some properties. A revenue management model will tell you to actually let people move out if it thinks demand for a new lease will pay more. It's tough, but you can't let your personal feelings get involved. Trust your price, quote confidently, and know that you won't make everyone happy. It's business.

Our company gives 45 days notice of a rent increase, and they are required to give 30 days notice to vacate, so residents have two weeks to decide.

I have noticed that since we increase our rent increase notice from 30 to 45 days, that more instead of fewer people are forgetting to sign the new lease before the deadline. We do remind them, but they just don't realize how quickly 45 days can pass. If they miss the deadline, they roll over to MTM automatically and are charged a $50 premium.

Our rent increases are typically $10-$30, and the amount we bill back for water/sewer was increased by $5 to help make up for a 30% increase from the city.

On one of my buildings we are increasing rents from $60-$150 per unit with utility surcharges also increasing by $15. This is anywhere from a 5-13% increase.

First, and foremost, check your state law. Many states have adopted laws that have a minimum notice requirement. In Texas, for example, if the notice required from the resident is 30 days, then the landlord must give them an extra 5 days notice equalling 35 days. If you have a 60 day requirement, the extra days must be 10. This keeps the resident from feeling forced into a renewal because they had no opportunity to shop around.

Now, if you are up for a couple of ideas?? One of our managers came up with the idea that simply assumes the resident would renew. She prepared the lease agreement with the new price and beginning date, rolled it into a scroll and tied it up with pretty curly ribbon. Then she put this new lease, along with an explanation letter, in a small, but nice renewal gift. Perhaps an insulated coffee bug with the property logo on it, filled with candy and the renewal notice. She then put a couple of helium ballons on it, and placed it in the kitchen of the resident's home, with a thank you note for being our resident. While she prepared the lease agreement for the longest lease term, her letter offered alternative terms and pricing. For example, a one year lease is $1000. A six month alternative is priced at $1050, and there is an option for a 90 day extension for $1100. Of course, you need to price out the month to month, which would be the highest offer + a $50 month to month fee. (All numbers are suggestions.)

We have also prepared a "cost to move" sheet, done in a way that is helpful. i.e. don't forget everything you need to do to move. Take a look below at a couple of items we used:

Don't forget to buy boxes. You can find them at Lowe's with small book boxes starting at $2.29 each.

If you are going to use a rental truck, be sure to book them early. Average prices are....

You get the picture... once you list everything out, they quickly discover it is cheaper and easier to pay the increase.

Hope I haven't given you too much! Good luck!