As a landlord, you want to see a profit from your property. You will also want to be fair to your tenants and any potential renters. This will ensure long-term occupancy, referrals, and true profits from your rental properties. In our latest post, we’ll help you determine when it’s time to raise the rent in Chicago.
Some landlords have trouble raising the rent or don’t do it as often as they should. While it doesn’t always make sense to increase the rental amount by leaps and bounds, you don’t want to sell yourself short either. Below, we’ll offer some ways to help you decide if its time to raise the rent on your Chicago rental property.
You’ve Added Value To The Property
Certain amenities and features will make a property worth more in terms of the monthly rent. A house with a pool will likely rent for more than one without a pool (although that is a pretty big addition!) You can still get the same effect by updating appliances, adding a garden, or swapping out the flooring. There are all kinds of changes and upgrades landlords can apply to earn more in rent each month. Look for upgrades that add value, with costs that you can easily recoup by raising the rent a bit. Don’t get too caught up in renovating the property, remember it is an investment property, not a home you live in or a property you need to design with your taste.
Rental Prices Have Gone Up
You want to keep the amount you’re asking for consistent with what other properties in the area are renting for. Often times landlords who are managing their properties on their own will get lackadaisical about raising the rent. Five years down the road and their tenants are still paying the same amount as when they moved in. In some cases, this can increase tenant loyalty, giving them no reason to move. But in other cases, if rent prices have spiked dramatically, landlords can find themselves losing out on thousands simply because they weren’t staying consistent with other rentals in their neighborhood.
Higher Ownership Costs
You don’t want to spend your valuable time and money on a rental property just so you can break even. Higher taxes, regular property maintenance, landscaping costs, the rising cost of utilities, and expensive insurance premiums can easily negate your profits. If the property begins to cost more than what you’re making on it each month, it might be time to consider raising the rent or finding another property to better meet your needs financially. You can’t base your rental amounts solely on what you are having to pay each month.
The Area Is Booming
When the area is in high demand, with very few available properties on the market, it can be the time to bump up your rent a few bucks. It doesn’t have to be an extreme hike as you still want to get renters in the door and you don’t want to be the landlord who is accused of price-gouging. But a few extra dollars each month can help cover maintenance, taxes, and some of the other costs homeowners face. If rent prices are on the rise, there is a good chance property values are too. This could mean a higher tax bill for you, so plan accordingly.
Knowing What To Charge
There are some great ways to help you determine how much to charge for Chicago rent. Many landlords utilize the 1% rule that states that the amount charged in rent each month should be 1% of the value of the home. For example, a home valued at $230,000 should rent for about $2,300 per month. If your house is more expensive, you’ll want to drop a bit below the 1% rule as rents will become too high for the average tenant. Next, take a look at what comparable properties are renting for in your neighborhood. You’ll want to find that sweet spot between making as much as possible, while still being able to attract high-quality tenants. You don’t want to outprice the market and find yourself stuck with a vacant property.
A good rule of thumb is to raise the rent by 3-5% each year. But as with anything else, there always exceptions to this rule. A landlord might keep rental costs down in exchange for a longer lease period. Assured vacancy can sometimes be worth the decreased rent. You should also factor in things like the condition of the property, the location, the current market, etc. The important takeaway here is to never sell yourself short when it’s time to raise the rent in Chicago. Before deciding to raise the rent, be sure to check for any rent-control laws in your area.