Raising Rent During COVID-19
Like every other industry in America, the real estate business has been seriously impacted by the coronavirus pandemic. For those who have rental units to offer, you will likely have seen that tenancy for luxury apartments and condos has tapered off, as more people keep a tighter rein on spending. Basic housing on the other hand, has been flat in terms of new occupancies, with no discernible increases or decreases, simply because people still need housing which is affordable. This might cause you to give serious thought to what you can reasonably do about raising rents when your tenants’ leases expire. Here are some considerations you should factor into your thinking.
Timing is bad
This is definitely not the best time to raise rent for your current tenants, because any increase at the present time might well push the residence into a bracket higher than the prevailing market rate. When you make the renewal rate significantly above other available units on the market, you will be providing tenants with a reason to look elsewhere. That might very well lead to a relatively long period of vacancy.
The cost of vacancies
Speaking of vacancies, the cost of them very often is steeper than any rent increase you might impose. For instance, if you were to raise the rent by $50 per month, that would net you an extra $600 annually. However, what would it cost you if that same rental unit were to be vacant for six months? More than likely, you would lose thousands of dollars because of the vacancy.
Bad public relations
In terms of public relations, imposing a rent increase when many tenants are already overwhelmed by unemployment or possibly decreased hours on the job, would be like rubbing salt in the wound. This would show that you don’t really care about their plight, and you’re more interested in profits, even at the expense of your suffering tenants. This is a case where showing a little sympathy can go a long way toward maintaining a good relationship with your tenants.
Greener grass appeal
When tenants have a rental increase imposed on them, one of their first reactions is to look around the housing market and see if something more attractive is available. Maybe there are newer-looking rental units, or they’re situated in a better location – any reason at all might cause the grass to look greener somewhere else. If you hold off on increasing the rent, you’ll be more likely to keep some tenants who would otherwise have been looking around.
Tenants who are satisfied and content with their situation have a tendency to stay in place for a long time. They will also be more conscientious about upkeep of the place, because they do expect to be there a while, and take pride in having a neat-looking abode. Part of this good feeling comes from the notion that a landlord isn’t just looking to get rich at their expense, but actually cares about their well-being to some extent.
Your best bet for maintaining good relations with tenants during the coronavirus era, is to maintain your rental rates at market rate or even slightly below, to show your good intentions. This will keep your rental units very competitive, and it should help to maintain great relations with your existing clientele, so that your rental units stay occupied and profitable.