How Much Should You Raise Rent Every Year? Learn What’s Legal, Fair, and Profitable - THE DAVID RANDOLPH

How Much Should You Raise Rent Every Year? Learn What’s Legal, Fair, and Profitable

how much should you raise rent every year

Why Rent Increases Matter for Real Estate Investors

Managing rental properties isn’t just about collecting monthly checks—it’s a business. And like any business, your costs go up over time. Property taxes, maintenance, landscaping, waste services, and even utility costs are on the rise. That $700 fridge you replaced last year might now cost $775 or more.

To keep your rental property profitable, you must periodically raise rent. But by how much? And what are the rules you need to follow?

Let’s break it down.

What’s the Average Annual Rent Increase?

Most landlords increase rent by 5% to 10% annually, especially during inflation. But that’s not a one-size-fits-all number. Your rental market, tenant demand, and local laws all play a role.

For example:

  • High-demand urban markets may support higher increases.
  • Areas with an oversupply of rentals may require more modest hikes.
  • Seasonal properties may allow for variable pricing.

Tip: Always research local rent control laws to avoid legal issues.

When Can a Landlord Legally Raise Rent?

You can generally raise rent when:

  • A fixed-term lease ends and is being renewed.
  • A month-to-month lease gives proper notice (usually 30-60 days).
  • A new tenant moves in.

Exceptions apply. Government-subsidized housing (like Section 8) and rent-controlled units (e.g., in NYC) often have strict guidelines.

When Rent Increases Are Not Allowed

Even experienced investors sometimes overlook these legal pitfalls. Avoid raising rent if:

  • The lease hasn’t expired or restricts increases.
  • No formal rent increase notice was issued.
  • Your reason is retaliatory or discriminatory (violates the Fair Housing Act).

Always ensure you’re following both federal and local landlord-tenant laws.

How Much Should You Increase Rent?

To find your “just right” rent increase, use this three-step process:

1. Calculate Your Operating Expenses

Add up all property expenses from the past 12 months:

  • Property taxes
  • Insurance
  • Repairs & maintenance
  • Management fees
  • Landscaping & utilities

Divide the total by 12 to get your monthly average. This gives you a breakeven baseline.

2. Study the Rental Market

Use tools like Zillow, Rentometer, or local MLS data to track rent trends in your area. Look for:

  • Occupancy rates
  • Renter migration patterns
  • Local price changes

This helps you gauge how much the market can bear without scaring away good tenants.

3. Compare Similar Rentals

Look at rentals nearby with similar features:

  • Square footage
  • Amenities
  • Condition
  • Location

Use these comps to determine a fair market rent. Adjust for unique features like a pool, garage, or upgraded kitchen.

How to Communicate Rent Increases to Tenants

Transparency goes a long way. When informing tenants:

  • Send a formal letter at least 90 days before lease renewal.
  • Clearly state the new rent (e.g., “Your rent will increase from $1,200 to $1,260”).
  • Explain the reasons (e.g., increased taxes, inflation, market alignment).
  • Ask if they plan to renew or vacate.

If you have a great tenant, add a personal note appreciating their tenancy. Empathy matters—especially if you want to retain them.

Should You Negotiate Rent Increases?

Sometimes, yes. If a reliable tenant pushes back:

  • Listen to their concerns.
  • Consider offering a smaller increase or a phased approach.
  • Think long-term: avoiding a vacancy may save more than a full increase.

That said, you’re under no obligation to negotiate—just ensure communication is respectful and professional.

Suggested Cluster Content

To strengthen your content strategy, consider adding these blog posts:

  • “How to Screen Tenants Like a Pro”
  • “Understanding Lease Agreements: A Landlord’s Guide”
  • “Top 10 Hidden Costs of Owning a Rental Property”
  • “5 Legal Mistakes New Landlords Make (and How to Avoid Them)”

FAQs About Raising Rent

Q: How often can I raise rent on a month-to-month lease?

A: Typically, once every 12 months with 30–60 days’ notice, depending on your state laws.

Q: Can tenants refuse a rent increase?

A: They can decline to renew, but if proper notice was given and local laws followed, the increase stands.

Q: Is it better to raise rent annually or wait several years?

A: Smaller, annual increases are generally more acceptable to tenants and help you stay aligned with rising costs.

Final Thoughts

Raising rent isn’t about greed—it’s about sustainability. By calculating your costs, understanding your market, and following the law, you can make informed, respectful decisions that benefit your bottom line and keep good tenants happy.

Need help optimizing your rental property strategy? Contact us today to learn how we help investors like you stay profitable.

David Randolph