Maximize returns.

Get Started For Free

How much can a landlord raise the rent? Factors to consider

Rent increase notice letter and ball point pen
by Jeff Rohde, posted in Investment Strategy

Landlords can increase the monthly rent, but there are rules they must follow. In this post, we will discuss how much landlords can legally raise rent and the process for doing so. 

We’ll also provide some resources to help you write a rent increase notice for your renters. Increasing rent to fair market value can be a great way to improve your return on investment (ROI).

Key takeaways

  • Raising the rent to fair market value can increase cash flow and overall ROI.
  • Before raising the rent, a landlord should consider factors such as the length of the lease agreement, the condition of the rental property, and current market conditions.
  • Before raising the rent, a tenant must be given proper notice to avoid potential conflicts and ensure a smooth transition to the new rent.


What factors can a landlord consider when raising rent prices on a tenant?

As a landlord, there are several factors to consider. 

One is the length of the lease agreement. For example, if the current lease is about to expire and you know the tenant wants to renew, you may have more negotiating power to raise the rent. 

Another factor to consider is the condition of the rental property. If the tenant has been taking good care of the unit, you may be more inclined to work with them on keeping their rent at a reasonable price. However, if the property needs repairs or updates, you may use this to justify a rent hike. 

Additionally, market conditions can play a role in your decision. For example, if rents in your area have been steadily increasing, you may be able to raise your prices without fear of losing tenants. 

Ultimately, there is no one right answer when it comes to raising rent prices. However, by considering all of these factors, you can make the best decision for yourself and your tenant.


real estate search

Where to find rent comparables

When renting out a property, setting the right price is crucial. 

If you charge too much, you could end up with a vacant unit. But if you charge too little, you could be leaving money on the table. Do your homework and find out what other comparable properties are renting for. 

Start by talking to a local real estate agent. They should have a good understanding of the market and can provide you with a list of similar properties. You can also search online listings to get an idea of prices in the area. 

Finally, consider any special features or amenities your property offers. Again, you can be confident that you’re getting the right price for your rental property by doing your research.

Resources for finding rental property fair market rent

Here are some online resources for finding the fair market rent for your property:


How much can a landlord legally raise rent prices in any given year or month?

Landlords in the U.S. are generally free to set their rents, and there is no federal limit on how much rent can be increased in any given year. 

In general, landlords are allowed to raise rents by any amount they see fit, as long as they give their tenants sufficient notice (usually 30 days). However, state and local laws may place restrictions on rent increases, particularly in areas where rents are already high or housing is in short supply.

Month-to-month lease

Month-to-month leases offer tenants a lot of flexibility, but they can also be a headache for landlords. If you want to raise the rent on a month-to-month tenant, you need to follow a few rules and guidelines. 

First, give your tenant at least 30 days’ notice in writing. This will give them time to find another place to live if they can’t afford the new rent. 

Second, make sure you have a good reason for raising the rent. If the lease allows it, you can increase the rent to match market rates or to cover increased costs (such as property taxes or utility bills). 

Finally, don’t be unreasonable—if you’re raising the rent by more than a few hundred dollars, you may have trouble finding another tenant who is willing to pay that much. By following these guidelines, you can avoid potential problems and keep your month-to-month tenants happy.

Long-term lease

Raising the rent on a tenant on a long-term lease can be tricky for landlords. 

On the one hand, you want to stay competitive with other landlords in your area, but on the other hand, you don’t want to price your tenants out of their homes. So how do you know when and how much to raise the rent?

The first step is to check your state’s laws on rent increases. Some states have limits on how much landlords can raise the rent each year, so you need to follow those guidelines. 

Once you know what the law says, you can start thinking about how much to raise the rent. To figure this out, take a look at your area’s rental market. 

See what other landlords are charging for similar properties and try to stay in line with those rates. If you’re way below the market average, you may need to raise the rent more than if you’re just slightly below average.

Once you’ve decided how much to raise the rent, it’s time to communicate with your tenant. While it’s not required by law, it’s good to give your tenant at least 30 days’ notice before increasing the rent.

Best practices for raising the rent

As a rule of thumb, it is generally considered best practice to only raise rents by a small amount each year to avoid placing undue financial burdens on tenants. 

In addition, landlords must be careful not to discriminate against tenants based on race, religion, gender, or other protected characteristics. Lastly, all landlords should be familiar with their local rent control laws, as these can place further restrictions on how much rents can be increased.


Benefits of raising the rent to fair market value

As a landlord, there are many factors to consider when setting rent prices. 

You want to charge enough rent to cover your costs and turn a profit. But you don’t want to price yourself out of the market and end up with vacant units. To strike the right balance, it’s essential to understand the benefits and disadvantages of raising the rent to fair market value.

One benefit of raising rent is that it can improve your cash flow. If you’re currently charging below-market rents, raising the rent to fair market value will immediately increase your income. This can be especially helpful if you’re tight on cash or have unexpected expenses. 

In addition, raising the rent can also increase your ROI. You’ll be able to recoup your initial investment faster and earn more money in the long run.

Of course, there are also some drawbacks to raising the rent. 

One downside is that it could lead to tenant turnover. If your tenants feel that they’re being priced out of the market, they may decide to move elsewhere. This can be costly in terms of time and money spent on advertising and reletting fees. 

In addition, raising the rent above fair market value could result in your property sitting vacant for an extended period of time. While there will be no rental income coming in, there are still operating expenses and a mortgage to pay if the property is financed.


Are there any restrictions on how much landlords can charge for rent in specific areas of the country?

In the U.S., there is no federal law that regulates how much landlords can charge for rent. However, there are several states and cities that have enacted their own rent control laws. 

For example, in New York City and San Francisco, landlords are limited to increases by the amount allowed by the Rent Guidelines Board and Rent Board. And in Los Angeles, landlords are restricted to annual increases based on the city’s Rent Stabilization Ordinance (RSO). 

These laws help to protect tenants from drastic rent increases, but they also may make it difficult for landlords to keep up with rising costs. On the other hand, landlord-friendly states typically have fewer restrictions on how much rent can be increased. 

For more information on specific state and local laws, landlords can check with their local housing authority or apartment association or use the interactive map of rent control laws by state maintained by the National Multifamily Housing Council (NMHC).


How to notify a tenant the rent will be increased

When it comes to renting property, one of the most important things for landlords and property managers to keep in mind is how to notify tenants of a rent increase properly. While there are various ways to go about this, some best practices should be followed to avoid potential conflict or misunderstandings. 

First, it is important to give tenants as much notice as possible. This may be 30, 60, or even 90 days depending on the lease agreement. This gives tenants time to plan for the increase and budget accordingly. 

Second, be clear and concise in your communication. For example, include the amount of the increase, when it will take effect, and any other relevant information. 

Finally, be understanding and flexible. Increasing rent can be a stressful time for tenants, so try to be understanding of their situation. If possible, offer a payment plan or other options that can make the increase more manageable. 

By following these best practices, you can help to ensure a smooth transition for you and your tenant.


Final thoughts

Landlords who are thinking of raising the rent prices on their property have a lot to consider. In addition to understanding state and local laws, landlords need to be aware of what comparable properties in the area are charging and how the increase will impact their tenants. 

Benefits of raising rent prices to fair market value include improved cash flow and ROI, but landlords should be mindful of potential drawbacks, such as tenant turnover and vacancy rates. By following these best practices, landlords can ensure that any rent increase is executed smoothly and without conflict.

Find this content useful? Share it with your friends!