Wellington Florida Real Estate Q&A:
Question: My tenants lease ends next month and they would like to renew it, should I increase their monthly rent?
Answer: This is a very popular question and the answer will depend on your situation, the tenants and market conditions.
The first thing I recommend doing is finding out the current market conditions and what your home would rent for in today’s real estate market. If your home is worth less trying to increase your tenants rent may not be wise, but if the market conditions support a higher rental amount there are a few things you may want to consider prior to raising it.
1. Do you have a good tenant in place and are you willing to possibly lose them with a rent increase?
2. How much will it cost you to find another tenant if you do lose your current tenant? Depending on the rental market you might be able to find a new tenant right away, but the reality is you may still have a 30 day vacancy period.
Here is a great way to determine whether or not you should increase your tenants rent.
1. Subtract your proposed rent from your current rent and multiple by 12 to establish the additional income you would obtain a year by increasing the rent.
Current Rent: $1,500
Proposed Rent Increase: $1,575
Additional Annual Income: $900
2. Once you establish the additional income subtract your expenses for a 30 day period along with the cost to find another tenant.
Additional Annual Income: $900
30 Day Expenses & Cost to Find another Tenant (mortgage, HOA fees, electric, water, real estate commission, cleaning, etc): $2,300
Based on these numbers the landlord would lose -$1,400 if they lost their current tenant, had a 30 day vacancy period and the new tenant pays $1,575 a month. The only way this landlord would obtain an additional $900 a year is if they had no vacancy and didn’t have to pay a real estate commission or any fees to find a new tenant. If the landlord cannot find a tenant to pay $1,575 a month they will lose even more than $1,400.
On the flip side your tenant would have their own expenses if they had to move, so they be more than willing to pay an additional $75 a month.
For more real estate questions and answers visit Wellington Florida Real Estate Q&A
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Should I Increase my Tenants Rent?
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