Rent Growth on Renewals
Is rent growth upon renewals a strategy or has it become a pain point? Is there a way to achieve rent growth and avoid turnover at the same time? Who is in the driver’s seat? It is a common misconception that to keep the perfect renter, an owner should avoid increasing rent. It is possible to do both. Here are a few strategies that will help you in achieve the desired rent growth, while avoiding unnecessary turnover.
- Time your rental expiration correctly. Don’t let your leases expire the week before Thanksgiving. This is never a good time to have a rental hit the market. You want your leases to start and end in the peak moving season from May-August. This will ensure you are renewing at the right time; hence help you get your desired renewal rate. Here’s the rationale: peak rental season means that rents are often higher than at non-peak times, enabling you to obtain a rate increase.
- Know your rental market. If you know the market has taken a huge jump in rents—as the Denver rental market has over the past 3-5 years—and your renter is considerably under market, then you are in a good position. This is the time to remind your renters that leaving your rental property will mean they will be paying market value, or significantly more in rent then your renewal offers
- Offer incentives. Maybe it is a free carpet cleaning, an offer to paint a room in the house, or an appealing gift card. Be creative and get to know your residents because people will stay longer when they are treated with respect and goodwill.
- Work well in advance of lease expiration. Renewal offers should be communicated to residents at least 60-70 days prior to the lease expiring. This simple courtesy gives you and the resident plenty of time to digest the change. It will also give your resident time to do some market research, which will show them that your property is appropriately priced. In giving your residents time to think through a rent increase, they will likely come the conclusion that the stress and cost of moving far outweighs the renewal increase.
Knowing your rentals’ value enables you to push rents appropriately, giving you an advantage in negotiating rental increases. Whether you get the renewal or have a resident move out, there is nothing to fear because you know your property’s worth. Knowing this takes the anxiety and fear out of either scenario.