Should you raise rent?
The rental was fine a year ago, and everything was peachy. The skies were blue, birds were flying…until you got smacked in the face with the fact that the cost of living increased.
And you have to increase the rent to break even in terms of income.
So much for everything going well.
If you increase the rent by a lot, you might scare your tenant away. And you don’t really want that to happen, because you’d have to pull out all the stops to find another tenant.
On the other hand, if you don’t increase the rent, it might put a dent in your finances and you might end up struggling financially.
What to do?
Sometimes, you can’t avoid having to raise rent
This is because of external factors like new laws or taxes, maybe even fees and charges. Or maybe the economy is bad.
It might be also that there are necessities that you have to buy, and the cost of those necessities increased. Things that you have control over but still have to spend for like maintenance (e.g: gutter cleaning, pest exterminators) and repairs (e.g: plumbing) and vacancies.
Not raising the rent when expenses/prices of things that you need increase won’t help you break even. So run the numbers and go through some calculations that will help you determine a figure that will help you sustain your income and (preferably + hopefully) not scare your tenant away.
While that might be the case, the market is still the ultimate factor
Despite a higher cost of living, your expenses don’t get a say in determining the rent. The market and economy do. The two factors ultimately have the say in the rent you can charge. Put a price that’s higher than the average value of the market, and you’ll lose out on money as it won’t appeal to tenants.
But if you need to charge more, but you can’t because of the market, you’ll need to reevaluate and reconsider if you should hold onto the property (cause it can’t bring you money or break even).
Don’t worry, making money isn’t a crime
…yes, raising the rent in proportion to the rising cost of living is reasonable. Whether it’s because of the cost of living, or just to earn money, it’s not exactly a crime as it is a business. And you as a landlord are conducting business, plus why you’re in a business is to make money.
So if your rentals are lower than the other or similar places in your area, but your property is on par with your competition, raise the rent and be on their level.
I want to increase the rent, but how much would be considered a decent amount?
Don’t be that one landlord who increased the rent by 20% (which is a HUGE increase by the way). Or 30%. Or 50%.
Well, unless you want to drive out your tenant on purpose or something.
You get the picture.
A yearly increase that (sane, normal, regular) people would be able to handle is usually between 3 to 5 percent. So if your rent is RM1100, it would be an increase of RM33 (that RM33 is still good money, okay? I mean, all the nasi lemak…).
Nevermind, forget it. I can’t raise the rent even if I wanted to.
Someone’s controlling your property with the Force? Or does a restriction on rent exist? If this is the case, you have to comply with the law. So unless you want to land in hot water or jump into a frying pan with full force, just leave it.
By the way, you also can’t suddenly raise the rent during the agreed tenancy/leasing. For example, if the tenancy agreement for a year states that the rental is RM1200, your tenant still has to pay you RM1200. You can’t suddenly raise it and ask for your tenant to immediately pay RM1300 every month until the lease ends.
Nope, nada, zip.
But if you want to land yourself in court and try Legal Battle Wars…
It’s not that I can’t raise the rent, I just… I feel bad. PEOPLE NEED A PLACE TO STAY.
Bless all that is good and holy because you’re a living angel. If you’re happy with the arrangement, that’s fine. You might want to consider increasing the price such that it meets the market rate to break even at least though.
Anyway, if you know what’s a good rate for your area, be confident in the amount you’ve set for rent. But if you need to, remember it’s always easier for tenants to handle a slight rent increase than a huge one.
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