When tenants fill out a rental application, one of the first things they look at is price. Most tenants choose a rental based on what it costs them each month and they’ll choose the best unit available in their price range.
So when you’re considering raising the rent, your tenants won’t be happy if there’s not a good reason behind it. Most are willing to pay for certain amenities if they feel that the update is justified and worthwhile.
Still, you must give your tenants reasonable notice, usually in the form of a formal letter, before raising the rent. For example, you can’t raise the rent on tenants that are locked in to a certain price range, and you can’t raise it until an existing contract is up.
Once you reach an appropriate time to increase the monthly price, your tenants can choose whether or not they want to stay. And if they’re good tenants, you’ll want them to stay. This underscores the importance of choosing renovations that are worth the money. Here are three to consider.
New kitchens and bathrooms
Whether you make a few well-placed updates or overhaul the entire area, kitchen and bathroom renovations are typically the most highly valued. According to NinoSitchinava, principal economist for Houzz, kitchens and bathroom updates are so common, it’s become expected. Landlords are making it a priority to get these updates finished.
Just make sure you remember your market. In a budget-friendly neighborhood, small updates like painting cabinet doors, switching the hardware, or changing one formica-style countertop for another will make the most difference.
In higher-end neighborhoods, consider custom kitchen and bathroom designs with the latest trends and design work. The high quality will easily attract tenants at a higher price point who don’t mind a rent increase in order to get the best home possible.
Brand new appliances
Tenants love nice appliances, even in lower-end rentals. It gives them the feeling of luxury without paying much for it. A set of stainless steel appliances in the kitchen can go a long way for a raise in rent, as can a washer and dryer provided in each apartment. Tenants simply don’t want to buy their own appliances anymore.
When deciding to buy brand new appliances, however, Forrest White, director of asset engineering for a Phoenix-based construction company warns: “An appliance package might produce a great return in one market, and do nothing in another becausedemand isn’t there.”
Research the market carefully before updating your appliance packages to the latest and greatest on the market. Some tenants won’t care, and they’ll be angry that you raised their rent when the old appliances were just as good.
Adding a bedroom
Although there are some zoning and space restrictions that would prevent you from adding a bedroom, research from BiggerPockets says that it’s well worth the effort and expense. This is one of the biggest things that a tenant is willing to increase their rent for because if they’re asking for another bedroom, they need it for a growing family, and they don’t want to move.
This also significantly increases the home’s resale value. Since your rental property is an investment, you want to increase the value as much as possible. After discussing your options with a certified contractor and getting all the zoning and coding permits you need, this fantastic addition will be worth every penny.