Owning a rental property in Brentwood to generate extra income is just like running a business. Landlords must manage their property, provide good customer service to tenants, and manage the bookkeeping and cash flow aspect.
With all these tasks, a landlord must decide whether to increase the rent of their property in Brentwood, CA. It can be a tricky situation, especially when your goal is to retain the tenants you already have.
Landlords often wonder how much to raise their rent, how often to do it, and when the right time to increase rent is.
By the end of this article, you’ll have the answer to all three of those questions and more! So, if you are considering increasing rent on your property in Brentwood, you’ve come to the right place.
To Increase Rent or Not – That is the Question
Some landlords make it a habit to increase rent every year, no matter if their current tenants renew their lease or not. While this is common practice, there are some instances where landlords may not want to increase rent so often.
A landlord may decide to keep the same price to retain a high-quality tenant who pays their rent on time. A rent increase could lead to the tenant ending their lease and moving out, leaving the landlord with vacant property.
Increasing rent is often on a case-by-case basis. It all depends on the landlord’s financial situation, the condition of the property, and the current real estate market climate.
Reasons to Increase Rent
Other than wanting to generate a higher profit, there are five main reasons a landlord should raise the rent of their Brentwood property.
1. Maintenance and Repair Costs
If a landlord finds himself putting more and more money into maintaining and repairing his property, he may want to consider increasing the rent.
Rather than putting himself in the hole and losing money on his rental property, he can earn more income to cover these expenses. It can be helpful and economical to do routine maintenance inspections to avoid serious issues and high, unexpected repair costs.
2. Property Taxes Go Up
It always seems like taxes are increasing – never decreasing. To keep up with the local property tax, landlords may decide to raise rent to cover these additional costs.
While tenants are not expected to pay the property tax of the home they’re living in; the cost can be worked into their rent. This is the landlord’s responsibility to determine how much of the rent will cover the property tax costs.
3. Insurance Policies
There are quite a handful of different insurance policies landlords must have in order to have a smooth and safe rental property.
Landlords should have homeowner’s insurance, landlord insurance, hazard and fire insurance, liability insurance, flood insurance, loss of income insurance, and an umbrella insurance policy, just to name a few.
Depending on the company and policy coverage, these premiums could be quite high for landlords. Therefore, with an increase in premiums or deductibles comes an increase in rent to cover these insurance costs.
4. Renovations to the Property
If a landlord takes time and invests in renovations to update their Brentwood property, then a rent increase is warranted. Not only will a rent increase cover the costs of the renovation over time, but the property is now more valuable thanks to the renovations.
So, the more valuable a landlord makes his rental property, the more rent he can ask from tenants. Some upgrades and renovations may include new modern appliances, renovating a kitchen or bathroom, or installing hardwood floors.
5. Overall Expenses
There are a lot of expenses that come with owning a rental property in Brentwood. Some landlords may have to pay HOA fees, property management fees, or other community taxes and fees.
When these prices increase, landlords must increase their rent to maintain the profit they’ve been making.
How Much Should Rent Be Increased?
This is one of the hardest parts of increasing the rent of your property. How much should you increase it?
The Tenant Protection Act of 2019, also known as AB 1482, allows annual rent increases of 5% plus the Consumer Price Index per year, up to 10%.
While this may only increase the monthly rent by $75 a month on an initial $1,500 a month lease, the overall annual increase is $900. This is ideal for tenants because it isn’t such a significant increase that it will deter them from renewing their lease.
However, if you’ve done major renovations and upgrades to the property, there is a possibility to increase rent by more than 5%. It’s essential to analyze the current rental market and find comparable properties to determine how much the rent should be.
Finding the Perfect Time to Increase Rent
There are a couple of different times when you can increase the rent of your Brentwood property. It’s essential to become familiar with local landlord-tenant laws before increasing rent, though. Different states have different legal requirements that landlords must follow.
When your tenant’s lease is coming to an end, it’s the perfect time to raise the rent if they decide to renew. Landlords must give notice of the rent increase, usually at least 60 days before the lease ends. This gives the tenant time to decide whether or not to renew the lease with the new price.
If the lease is month-to-month, then the landlord must provide 30 days’ notice of a rent increase. These increases can theoretically happen on a monthly basis.
If the property is on the market and ready for a new tenant, the landlord may decide to put a new rent price on it. This is the perfect opportunity to test the market and see how much you can increase the price.
Remember, though, if the price is too high, there won’t be many people interested in leasing it. This can cause an even longer vacancy if the rental price is not set within the market conditions.
Do Not Increase Rent During a Lease Term
Some landlords may feel the need to increase the rent in the middle of their tenant’s lease term. We advise against doing this.
The tenant does not have to accept the new rent price. Since they have an agreement already, they are not required to pay more than what was agreed upon.
It is best to wait for the lease renewal or for a new tenant to move in.
Set the Perfect Rent Price Every Time with Blue Line Property Management
The best way to increase rent in Brentwood is with the help of property management professionals at Blue Line Property Management.
As the leading property management company in Brentwood, our experienced team will help you decide on the right rental price for your property. Not only will we increase your profits, but we will also manage your tenants, maintenance, and repairs!
If you’re tired of dedicating so much of your time to your rental property, then we may be just what you’ve been looking for.
Give us a call to see how we can help you generate higher profits from your Brentwood rental property today!