How to Avoid Losing Good Tenants Due to a Rent Increase

Unfortunately some tenants believe that a rent increase is a kick in the guts after all the hard work they’ve done to keep the property in good condition and always paying the rent on time. But the honest truth is, it's just apart of living. Everything goes up.

The trick is to provide them value and reason to keep living in your property. Let me show you how.

Good Tenants Stay With Good Property Owners

Just to recap, good tenants are those who always pay the rent on time, easy to deal with and look after your property with great care. These are not rare qualities, but they are precious. When good tenants hand you notice that they are moving out over a rent increase, you not only lose the income while the property is vacant, you have to deal preparing the house for inspections, advertise the property, schedule inspections and screen new tenants.

The first step to avoiding the loss of tenants over a rent increase is to make the tenant’s renting experience the best it can be. Of course, you need to begin giving value long before it is time for an increase. This means providing a clean and comfortable house, and to stay on top of maintenance issues as they occur. Be responsive to your tenant’s needs, ensure that you are available when they have an issue, and schedule your walk-throughs (Routine Inspections) at times that are convenient for them.

A reasonable rent increase alone is usually not enough to cause tenants to move. Being a responsive and responsible property owner or manager who looks after the property to give tenants the best value takes this factor off the table. However, there are still times when the tenants see a rent increase as a reason to move. If this is the case, there are still a few things that the property owner can do.

Remind Them That Staying is Cheaper Than Going

As we discussed in an earlier post, it is very important to ensure that your rent increase really is reasonable. In part, this means increasing the rent a small amount on an annual basis. The most important factor is to keep track of the rental rates in your area. If your tenants are paying a higher rent to similar properties in your area currently up for rent on realestate.com.au, your tenants really do have a good reason to consider moving.

If you are indeed giving your tenants good value, you may need to point out to them the costs that they will have to deal with if they do move. They will need to be ready to pay move in costs for their new home, which will include first month’s rent and a security bond. There will also be utility connection and moving costs that is sure to be a minimum of $2,000 for typical local move.

Whenever someone moves into a new place there are going to be new items that have to be bought. Some of them are relatively simple things, like shower curtains or window coverings, but they all add up. Their furniture has probably been selected to match the home they are in now. Of course there is the time off work and hassle they will have to deal with in the actual move. They will need to hire or borrow a truck, as well as find boxes, tape, blankets and not to mention all the cleaning thats involved. The list goes on.

The most convincing case for staying usually comes down to numbers. Point out to your tenants how small your rent increase actually is. If they are are paying $400/week, a 3% rent increase is only $12/week which comes to $624 annually. They will probably have to spend 3 times that to accomplish their move! (that’s 3 years to recoup the cost of their move). As the final knockout punch, point out that rents are going up everywhere, if they are moving into a place thats cheaper now, there is a good chance that the rent will increase there as well.

There's Always Room For Negotiation After The Rent Increase

If you feel there is a possibility that your tenants are considering moving out, a polite phone call or email outlining these factors is not out of line. Don’t forget that even after you've sent a rent increase notice and you’ve had the conversation about costs, there is still room for negotiation. You may come to an agreement to reduce the increase slightly, but increase the lease term for another year or two.

Some tenants have other reasons than increasing rent for moving, but if they are planning to stay in the area for a while, you may consider offering them a longer term lease. This eliminates any “surprises” of rent increases for the tenant. The best part for you is knowing your property will be occupied for the duration of the lease.

Negotiation Tip: Find out their actual reason for moving before negotiating. Then, look for a win-win result for both of you.