When I’m teaching classes at the local colleges about how to manage an investment property, I get a lot of questions about raising rent and when to increase rent. There has been a lot of rent control legislation over the last year in different communities. When you’re increasing rent, consider the demographics of your community. Here in Santa Cruz, most tenants work in a service industry, which is quite different from Silicon Valley, where there’s more of a professional economic climate. In a service industry region, people do not see their economic situations change overnight. A rent increase will matter to them, so consider that.
Increasing Rent Every Year
Smaller increases every year will be more effective because that allows your tenants to get used to the idea of paying a little bit more every time their lease renews. Your costs go up with taxes and insurances, even disregarding maintenance. When you’re determining how much to charge, don’t go on Craigslist. Those prices are all over the place. Google property management companies in your area and look at their websites. See what those properties are going for. A property manager won’t put a property out there that will sit vacant for 30, 60, or 90 days. We want to rent homes quickly. At Portola, our properties usually rent within 15 to 19 days.
Property Management Santa Cruz: Legal Requirements
The amount you raise the rent will impact how much notice you’re legally required to provide. If you are going to raise the rent by more than 10 percent, you need to give a 60 day notice period. If the increase is less than 10 percent, only a 30 day notice is necessary.
There are two things to keep in mind. First, be careful about raising your rent to the maximum because it will trigger a tenant revolt, and you’ll get rent control laws which force you to keep rent low at all times. Second, stay a little below the maximum rental amount, and be fair to your tenants. If they take care of the property and have been there a while, create goodwill and give them a break.
As an investment, you want to make sure you’re increasing the rent a little bit every year. If you have other questions about how and when to raise your rent, please contact us at Portola Property Management. We’d be happy to answer any of your Santa Cruz property management questions.