NEXUS PROPERTY MANAGEMENT 101: SHOULD I RAISE MY RENTS?
ALWAYS THINK LONG TERM AND VALUE ADDITION…AVOID THE SHORT TERM GRAB
Whenever you’re trying to make the best possible decision it can be helpful to think back to why it is you do what you do? In this case, why did you get involved in real estate investment? If your plan was to take advantage of every twist and turn in the market and to get as much out of your tenants as possible, then yes, raising the rent makes lots of sense for you. On the other hand, if your “why” was rooted in more disciplined long term gains and adding value to your real estate portfolio, the answer to raising the rent will likely… still be “yes”.
REMEMBER: YOU’RE RUNNING A BUSINESS
If you’re a successful real estate investor with your eye on the future, it’s likely you care about the well-being of your tenants. At Nexus Property Management®, we take great pride in a business model that aims to add value for tenants, property owners, our team members, and the communities we operate in as a whole. You also need to remember that you are running a business of your own. None of us want to contribute to someone else’s homelessness. None of us want to force anyone into a situation where they can’t afford anything beyond their rent. We want our tenants to live comfortably. We want them to take pride in the place they live…but it’s not the landlord’s responsibility to take on anyone’s financial burden by ignoring changes in the market.
We are fortunate to live in a country that provides financial safety nets for those who need assistance. Section 8 is the most well-known but there are plenty of additional needs-based subsidized housing programs out there. Additionally, states are currently offering Rent Relief due to the Covid Pandemic (visit this Nexus Article for Rent Relief Application details and links). The point is this: it is your responsibility to pay taxes, your mortgage, water, sewer, and to invest in the property for the sake of moving it forward. It is difficult to do all of this if you are also concerned about subsidizing the finances of your tenants by keeping rents artificially low.
Also, keep in mind…those property taxes you’re paying are funding local schools, police, and fire departments. By tending to your property ownership responsibilities, you are giving back to the community.
[ Learn More: 4 TYPES OF REAL ESTATE INVESTOR: WHICH ONE ARE YOU? ]
HOW MUCH MORE ARE OTHER PEOPLE CHARGING FOR RENT?
Nexus recently took over management of a property that had 2 bedroom units with a double parlor that were going for $700! Fantastic for whoever was living there but sadly those days are over.
As a quick measure, you can expect the rental market to increase by about 10% each year. That’s 100% over a decade! Now, we’re not saying you need to, or even that you should, jack up your rent to meet those numbers…but it doesn’t hurt to know what the figures are. If you did read that and salivate, keep a couple things in mind:
1) Increasing that much too quickly is just not sustainable (remember: your goal is long term tenancy)
2) Increasing that much too quickly in not fair to tenants
3) Increasing that much will quickly lead to more maintenance requests
4) Increasing that much will ultimately lead to eviction and/or vacancy
[ Learn More: THE BEST WAY TO AVOID A PAINFUL EVICTION ]
[ Learn More: AVOID SHORT TERM GAINS AT THE EXPENSE OF LONG TERM SECURITY ]
As is always the case, you need to find a sweet spot that is reasonable based on other variables and the value you provide to your tenants.
SPEAKING OF ADDING VALUE: MAKE YOUR MONEY WORK FOR YOU
If you talk to anyone who knows anything about investment they’ll tell you a bunch about compounding interest and the importance of having your money work for you. They’re right!…but compounding works a little differently in real estate investment. In short, you can think: “What’s the most efficient way for me to add value that will scale to all of my properties?” And there is one answer…hire someone to help.
HIRE A PROFESSIONAL PROPERTY MANAGER!!!
By raising your rents by about $80/month, which is fair and reasonable based on the numbers above, you can easily afford to hire a property management company to help grow your portfolio. That $80/month might not be going directly into your pocket, but it’s going so much further because you now have an ally working to add value to all of your assets. Remember, investment is all about playing the long game and with the right property manager carrying your clubs, you’ll reap huge gains on the back nine.
Hiring a property manager is what truly turns investment profit into passive income. A reputable company will handle all leasing, maintenance, and management tasks and will help you access vendors and third parties that can be especially hard to lock down these days. When it comes to keeping tenants paying, you need to keep them happy. And the key to their happiness is feeling valued, which can only be delivered with prompt and reliable maintenance service. You can’t afford to play phone tag when pipes have burst or the heat is out. Find a property manager that has maintenance services available 24/7/365 to ensure your properties and tenants are best cared for.
[ Learn More: 3 REASONS IT PAYS TO HAVE AN REAL ESTATE EXPERT IN YOUR CORNER ]
IN SUMMARY:
As a nationwide franchise, Nexus Property Management® hangs its hat on our well-cultivated reputation. We encourage all of our clients to treat their tenants with respect and we support that effort with emergency maintenance services every day of the year. From that position, we’re also comfortable saying that it’s OK to raise your rents to keep up with the market, as long as you do so in a way that will not destroy the relationship you have with your tenants. YOU NEED TO KEEP YOUR EYE ON THE LONG TERM AND THE BEST WAY TO DO THAT IS TO HIRE AN EXPERT…and by raising rents just a little, you can do so without any added expenses on your end.
At Nexus we are devoted to revolutionizing the real estate investment landscape. Better informed landlords make for a more vibrant and successful real estate environment. Be sure to reach out to our team if you are interested in learning more about the advantages of working with a property manager and to see if we’re a good fit for you.
NEXUS PROPERTY MANAGEMENT® FRANCHISE OPPORTUNITIES AVAILABLE
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Mick Lefort is the Vice President of Operations for Nexus Property Management®. A National Property Management Franchise that manages all types of rental property from single family homes or condos to large apartment buildings and complexes.
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