TIP OF THE MONTH - December 2011
RESIDENTAL RENT INCREASES
Essential Facts-Real Estate Management
There are several types of rent increases, as well as adjustment to services that act as rent increases.
Economic Increase: If operating
expenses (insurance, taxes, utilities, etc.) a Landlord may decide to
make a corresponding increase in rent. The amount of the increase
is usually based on what the market will bear. In some cases,
expenses increase but the rental market will not permit rents to be
raised; the increased costs are then absorbed by the property.
New Tenant Increase: If market
conditions permit, rent should be increased whenever occupancy
changes. This accomplishes two goals: existing Tenants feel they
are getting a better deal because of their longevity; it helps
establish a new higher market level for future increases for existing
Elimination of Services:
Another form of increase is the elimination of Tenant services.
Examples: Discontinuing free cable television, converting master meter
electric & gas utilities to separate meters paid directly by the
Tenants, reducing frequency of inspections, discontinuing supplying
appliances (washer & dryer, micro-wave ovens, stoves,
Scrooge Increases: Landlords
should not schedule increases at in-convenient times, such as holiday
season. Such “Scrooge increases should be avoided, since they can
adversely affect the Landlord’s relationship with Tenants.
Nuisance Increases: This is a
small increase in rent that a Tenant will agree to pay simply to avoid
incurring the cost and bother of moving. Nuisance increases are used as
a last resort when a larger economic increase is not feasible.
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This web page was updated on 11/29/2011.