There are many factors that influence the right rental rate for a home. The value of the neighborhood and the home’s assessed property value may go up. Increased demand and increased maintenance costs factor into the rent you expect for a property. When property values go up, so too must the rent. So how do you reevaluate your rental rate and raise the rent based on rising housing prices?


Calculating Rental Rate by Home Value

Start with the 1% rule. A home’s monthly rent should equal between 0.8 and 1.1% of the home’s value, or around 1% as a rule of thumb. For example, a $250,000 home is likely to rent around $2,500 per month. If the home value goes up, you can re-evaluate rent based on 1% of the new value.


Keeping Pace with Neighborhood Rates

Don’t forget to keep track of the other rental rates in the neighborhood. It’s important to stay competitive, asking a comparable amount for your home without being the highest or lowest price in each housing area. Stay aware of the rental prices for other homes in your neighborhood and section of the city.


Rental Rate Restrictions

There may be local or building-specific restrictions on raising the rent. Become familiar with local rental laws and policies. Make sure that any current tenants are not protected from normal rental practices like fixed-rent homes. Most of the time, property owners can raise the rent as property values change, but there are sometimes legal restrictions.


Listing at the New Rental Rate

If property values have risen since your last tenant, you can list the new rental vacancy at the higher price. Between tenants is the easiest way to raise the rent because it bothers noones routine or planned budget. Simply spruce up the house during your usual tenant turnover process, take a new batch of flattering photos, and list at the now-higher local rental rate.


Raise the Rent Gradually with Existing Tenants

IF you do have current tenants, raise the rent gradually. You cannot legally change the rent amount during the term of a lease, you’ll need to raise the rent when the next lease is renewed. Do not surprise your tenants with a rent increase. Warn them several months ahead of time and don’t add more than $100 to the monthly rent each year. You can also write a rent increase acclimation plan for the next lease to help your tenants adapt to the increased housing expense.


Property values rising in your area? We can help you determine the correct new rental rate and put it into action. Contact us today to consult on your rental portfolio.