Inflation has been barely noticeable for quite a while, but as St. Cloud shoppers have begun to notice how it’s been creeping up lately. For St. Cloud landlords, that triggers a subject that directly impacts the profitability of their real estate investment.
Managing rent increases properly—and communicating them in a manner calculated to preserve your tenants’ goodwill—is a subject estate author Kevin Ortner writes about in Realtor Magazine. A few of his insights:
Raise rents on a regular schedule—usually, this will come at each lease renewal period (or when the agreement specifies)—but for month-to-month situations, once a year is recommended. Small increments on an annual basis are more predictable (and agreeable) than “catch up” raises scheduled less frequently.
Be competitive. The “sweet spot” you are looking for is the best price you can get for your rental—which is also actually “how much tenants are willing to pay.” That’s subject to compliance with Minnesota and local laws in accordance with the terms of your lease. Research by starting with a look at the Bureau of Labor Statistics’ annual calculation of Shelter Cost Changes—most recently, 3.4% at the end of August. The national trends are good to know but are not as significant as the more important data: the rates similar St. Cloud rentals are currently advertising.
Give extra notice. You’re required to abide by the law and your lease, but when you give tenants more time, it makes any raise less burdensome. If the raise is competitive, tenants will have ample time to shop around and see that it’s reasonable.
Work to keep good tenants happy. The most successful landlords frequently take their best tenants’ situations into consideration. If you decide to cut them some slack as a way of cultivating the relationship, you might even do what Ortner suggests: “show them what the rent increase was going to be”—but with that number crossed out and a smaller one in its place. You should also have determined the operating cost rises behind the rent increase, and be willing to share those facts.
The Ortner prescriptions are aimed at maximizing profitability by keeping rent increases rational—and tenant-landlord communications open. If you have ever considered the investment potential of becoming a landlord yourself, right now is a terrific time to investigate the opportunities our St. Cloud market is offering. Give me a call—I’ll show you what I mean!
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