Nobody likes a landlord that jacks up their rent every year and forces them to rethink their budget. Unfortunately, it isn't always up to the landlords whether or not they need to change the amount of rent.
A lot of factors go into this number, and it's important to understand them whether you're a new or an old landlord. Raise it too high and you can easily drive tenants out who want something more affordable. Not raising your rent when you need to can lead to a loss on your investment.
Here's how to calculate a rent increase in Phoenix, AZ.
Determine the Average Rent In Phoenix
What you should always do as a landlord is keep an eye on the average rent in your area. This number will fluctuate from year to year, and it's best to keep your property within that range. It varies widely depending on the neighborhood, the amenities offered, and the type of property.
Knowing your rental value will also help you find new properties to purchase and calculate property taxes for each year.
Consider Average Rent Increase Per Year
After you know the baseline rent you can charge, you'll need to consider how much this average changes from year to year.
For example, most areas see rent increases of around 3 percent every year. However, some neighborhoods may have seen this price increase by a lot more due to a variety of different factors.
The average increase should serve as a guideline. Your pricing will also differ based on any changes you've made to the property as well as your personal choice.
Factor In Maintenance Costs
One reason a landlord might send their tenant a rent increase letter is if the cost of maintenance has gone up. This includes things such as plumbing, utilities, and even landscaping.
Maybe you want to clean up the outside property, but the landscaping service you've hired is more than your current budget allows. Or maybe there are some repairs you've put off that you need to take care of.
Either way, it's important to make it clear to your renters why there's a change in your prices.
Account for Depreciation of Rental Property
Rental property depreciation occurs as buildings age. They get older and more worn out, and repairs become more difficult to carry out.
As such, landlords must take into account these repairs and potential renovations that may need to go into their property when they adjust the rental prices. After all, people usually don't want to pay premium prices for a property that isn't providing premium quality.
How to Calculate a Rent Increase
How to calculate a rent increase in your area takes into consideration the average rent in your area, the average increase every year, and whatever recent changes you've made to your property. It also helps to know how your tenants feel about your current prices so you don't change them too much.
PMI Phoenix Metro can help you with any of your property management needs in the Phoenix area. Our office is part of a nearly 20-year-old franchise in this industry. Contact us today to learn more and get a free rental analysis.
