If you were to ask your tenants when it would be convenient to raise the rent, they would probably say there is never a good time. That response is understandable. After all, what would you tell the attendant at the local petrol station if he asked when it would be appropriate to increase fuel prices?

There is no ideal time of the year to raise rent that tenants will welcome. So the question becomes, “When should I implement a rent increase?” Regardless of when you issue the notice, there is always a chance your tenants may consider moving out. The key is to minimise that possibility as much as possible, and here is how you can do that.

Establishing a Consistent Pattern

Although tenants generally dislike rent increases, many are realistic enough to anticipate them since the cost of living continues to rise. As a rule of thumb, it is advisable to keep increases moderate but consistent—typically around 3% annually based on the rent they currently pay.

Tenants tend to be more accepting when rent adjustments are predictable and easier to plan for. Most tenants start on a six- to twelve-month lease upon moving in. Implementing a small end-of-year increase of around 3% helps establish a pattern, naturally preparing tenants for a similar adjustment the following year.

Considering Market Conditions

Adopting a standard 3% annual increase is not always appropriate. It is important to consider the market value of your property from the tenant’s perspective. For instance, if you raise the rent from $500 to $515, but similar properties in your area are listed for $500 per week, tenants may be encouraged to look elsewhere for better value. This could leave your property vacant, potentially costing you around $1,000 in lost rent and requiring additional effort to source and screen new tenants. In such situations, increasing the rent may not be advisable.

Balancing Rent Increases with Long-Term Tenants

If securing tenants was difficult previously, you may decide to keep the rent unchanged to retain your current tenants. Alternatively, if tenants prefer not to have a rent increase, they may be willing to sign a longer-term lease. For example, I once managed a home in a less desirable location that sat vacant for four weeks before good tenants were found. After six months, they were considering moving out, so I offered a two-year lease without a rent increase as an incentive. They accepted, and I retained them for another two years.

Is There an Unfavourable Time to Raise Rent?

It is often suggested that increasing rent around the Christmas season is advantageous because people are generally reluctant to move during this period. However, I tend to prefer the opposite. If I am planning a rent increase, spring or autumn is usually more suitable. These seasons are typically when people are more open to relocating, so in the event that the increase leads a tenant to leave, there is usually a larger pool of potential tenants available to fill the vacancy quickly.

Nonetheless, keeping reliable tenants satisfied is always the better strategy. In a future discussion, we will look at how to retain tenants who express a desire to move out due to a rent increase.

Increasing Rent Reflects Growing Property Value

Raising rent does not only generate additional income; it also enhances the value of your property. Property valuers often inquire about the current rent amount because it directly influences the property’s valuation.

With an increased property value, you can potentially leverage the added equity to borrow more from the bank, allowing you to expand your property portfolio.