Property taxes went up and you had to replace the furnace, and now the balance sheet on your rental is looking less favorable. With your tenant’s lease up for renewal, it may seem like the perfect time to raise the rent. But use caution.
Unless rents in your area are increasing, raising the rent because of personal factors or expenses is likely to backfire. Above-market rental rates may prolong vacancies and drive good tenants to a comparable, less expensive property nearby, costing you money in the long run.
So how do you know if you could and should charge more?
Currently, overall DC metro rents have slowed, with a slight decrease in rents over last year as thousands of new units are becoming available. That makes it an especially important time to study the market for your type of property in your neighborhood before implementing any increase.
Check out rental listings on popular sites to see what’s for rent in your neighborhood and comparable areas nearby. Look for homes with similar features, size and number of bedrooms and bathrooms to get an idea of what’s available to your potential or current tenants. Which listings rent quickly and which ones remain available for a long time offer clues as to how well the competition is priced.
Be sure to consider the details in your comparisons, too. Are parking, pet fees or other bonuses included in the rent? A realistic assessment of how the condition and amenities of your unit compare to others, and how valuable those attributes are to tenants, is important in determining how much tenants will pay.
Professional property management can help. A good company will have a strong grasp of the overall rental market and individual neighborhoods. Managers also work with scores of property owners and tenants, giving them first-hand knowledge of what tenants are looking for and a realistic idea of how your property stacks up to comparable units, including those that aren’t currently available. That can be especially helpful if you’re trying to make a decision during a period when rental inventory is low.
Keep in mind that the district’s rent control laws limit how much and how often many D.C. owners may raise the rent. Units built after 1975 and those owned by landlords with four or fewer properties are generally exempt from rent control.
If your unit is rent controlled, you may only raise the rent once a year by a maximum amount set by the city each year. This year, the maximum increase is 3.4 percent, or 1.4 percent for elderly or disabled tenants. When a unit is vacant, landlords may increase the rent by 10 percent or raise the rent to the market rate, capped at a 30 percent increase.
The district must approve other increases, including those based on improvements made to the unit. The Department of Housing and Community Development website offers more details on rent control.
If you do decide a rent increase makes sense, give your tenants plenty of notice – at least as much as required by your lease and the law. D.C. and Arlington require 30 days written notice.
– By Jill S. Gross