Good tenants are a landlord’s dream. They pay rent on time, they’re easy to deal with and they’re consistent and dependable. They can also help you avoid the high cost of rental turnover, which might range from hundreds to several thousand dollars per unit. When you have a good tenant, you’re usually hoping they’ll ask for a renewal at lease-end. 

But you also need to keep up with your own living expenses, rental property tax increases, maintenance costs and more — so raising rent is a fact of being a landlord. How do you balance increasing the rent to maintain your business without scaring away your reliable tenants?

According to the Zillow Group Consumer Housing Trends Report 2019, 78% of renters surveyed had experienced a rent increase, and 55% of them said it affected their decision to move. 

If you want your tenants to renew instead of move, here are five things to consider before sending a rent increase notice. 

1. Know your local market

Make sure you’re aware of what comparable rental rates are in your area by using our rental pricing tool. If your rates are below market and you want to raise them, it’s a good idea to keep your increase at or below 5% to avoid pushing your tenant out. You might consider spreading out your increase over 2-3 years if you’re significantly below market.

Did you know? The U.S. median change in monthly rent year over year is +2.2%, or +$36/month.

Remember, before implementing any rent increase, be aware of the rules in your jurisdiction around rent increase caps, limitations or any applicable rent control laws. Rules may differ for Housing Choice Voucher (Section 8) recipients.

2. Build good relationships with your tenants

Just as you’ll want to keep reliable tenants, tenants are more likely to stay at a rental managed by a responsible and responsive landlord. A rent increase may feel like a worthwhile trade-off when a tenant knows they’re getting great service from their landlord.

To earn a reputation as a good landlord, make sure you respond promptly to property issues like maintenance and repairs — a little preventative maintenance can go a long way. Also, be mindful of your tenants’ privacy: Limit walkthroughs, be upfront about your inspection schedule, and always give your tenants advance notice before visiting the property in accordance with the lease agreement and local law.

3. Consider renewal incentives

Making a commitment is a good way to show your tenants they’re appreciated. Consider offering a lower rate increase if they sign a 2-year lease, for example. They get a better rate, and you get the stability of two years of occupancy. 

You may also want to encourage them by telling them about improvements you plan to make. If they’ve mentioned that the windows are drafty, and window replacement is already on your list of capital improvements for your rental, you could prioritize that upgrade as a gesture of goodwill. It improves your tenant’s living experience — and your property. 

4. Provide plenty of notice

If you’re planning to raise the rent, contacting your tenants earlier than the minimum required notice can help them budget for the increase, and it gives you time to plan for a turnover should they decide not to renew. Notice typically needs to be given in writing, but calling first is a courtesy that will be appreciated and gives the tenant an opportunity to ask questions. If you do call, be prepared to provide clear, succinct answers to potential questions.

If you choose to increase rent, make sure you know how much notice you need to give in your location. Typically this will be 30 or 60 days, but check your rental agreement or local regulations.

5. Sometimes, not raising the rent can be the right choice

If you have great tenants who always pay on time, who take good care of your property, and who you don’t want to lose, it might be in your best interest to maintain the current rental rate. If you feel like you’ll need to raise rent in the future to sustain your business, you could choose to be upfront: Let them know you won’t be increasing rent this year because they’re a great tenant, but that you’ll likely need to make a small market increase next year.