Between 2023 and 2024, Cleveland saw an outstanding 7.4% increase in median rent. As a real estate investor, this trend may put you in a tough spot.
When you have to increase rent to stay profitable, the big question is: how much? If your increases outpace the market, you'll likely struggle to attract tenants. If you don't increase your rent enough, you're leaving money on the table.
Want to know more about how to calculate your rental increases? Here's what this process involves and how to communicate it to your tenants!
Understanding Rental Increases
At its core, a rental increase should reflect the fluctuating market value of a property. At the same time, it needs to cover costs and enhance the landlord's ability to provide quality service.
Finding a balance between these factors involves understanding multiple facets of the rental market. Several key factors that influence rental increases are:
- Area development and improvement plans
- Inflation and overall economic conditions
- Occupancy rates in the neighborhood
- Improvements made to the property
By keeping an eye on these factors, you can plan rental increases in a way that aligns with market demand. At the same time, you'll respect tenant rights and provide assistance with budgeting for rent.
Calculating Rental Increase Percentages
To calculate rental increases accurately, start by looking at your current rental price. Then, reference your previous rent amounts and apply a percentage increase based on the findings from your current market analysis.
For instance, let's say you typically follow a 3% annual increase. However, you discover that comparable units nearby are charging 5% more. In this situation, you should strongly consider raising your rate to maximize your income.
Communicating with Tenants
As important as it is to follow the market, remember to let your tenants know about any changes to rent. Effective communication is the backbone of successful property management. When announcing a rental increase:
- Provide adequate notice: Tenants should be informed well in advance so they can adjust their budgets
- Explain the rationale: Share why the increase is necessary based on rental market trends and property improvements
- Highlight the benefits: If you've made upgrades or repairs, remind tenants of the added value they'll keep receiving
Approaching rental increases in this manner fosters transparency and mutual respect. This can be a key factor in long-term tenant retention.
Maximizing Rental Income
In addition to increasing rents, landlords can explore various techniques to maximize their rental income. Some examples include:
- Implementing property upgrades
- Enhancing curb appeal to attract quality tenants
- Offering flexible lease terms
Oftentimes, these techniques will be a better alternative to increasing rent. Try to look at rental increases not just as a response to inflation, but as an opportunity to grow and provide an exceptional living experience.
Property Management Advice in Cleveland, OH
The bottom line: rental increases in Cleveland aren't a simple matter. If you're not 100% sure your math is correct, hire a professional for help.
Our market analysis experts at PMI CLE eAgent can help you determine the rental value of your home. We'll consider your rental's location, amenities, and a range of other factors to come up with a personalized property analysis report!
Start using our services by getting a free rental analysis right here!
