In my experience, property owners in the Lakewood Ranch community are very reluctant to raise rental rates for their single-family homes and multi-family properties (in the Lakewood Ranch area, think condos). However, this is a mentality that extends to all of the Gulf Coast when it comes to rent increases.
Shying away from this unpleasant task is totally understandable, even for investors with more than one property who seek to grow their portfolio.
- Fear of breaking the kind of 'bad news' that can affect rent collection
- The time and effort associated with posing a rental rate increase
- Uncertainty in the Lakewood Ranch rental market
- (Misplaced) responsibility towards your renters
All of the above contribute to your own uncertainty as a property owner. It's one of the many reasons why property investors turn to our property management services to handle every element of rent collection.
Perhaps the biggest fear investors feel when debating a rental increase are the turnover costs associated with this choice when a qualified tenant decides to move as a result. If you are relying on the long-term income you've achieved as a result of investing, I can certainly understand how scary the thought of a vacancy can be; make-ready costs coupled with tenant placement and tenant screening expenses can quickly mount up.
Not Raising the Rent Is Leaving Money on the Table
However, these expenses should not be a concern if you are committed to ensuring your investment properties run like a genuine business! As a Lakewood Ranch property management firm, we advise the property owners we serve to build up cash reserves equal to 3 months' expenses. This way, you can deal with any unexpected costs and negotiate renewal rates with confidence that are in-line with the Lakewood Ranch rental market.
The response we often hear when we inform residents of a rent increase is the following: 'But I am a high-quality renter! I look after the place and pay rent on time!' Our reply to this viewpoint from the perspective of serving our investors is, 'That is the reason we are allowing you to renew your lease. Not a reason why we shouldn’t raise the rent.'
This isn't to say that you should ignore the 'human element' associated with running rental homes as a business—it's just that you need to acknowledge your portfolio is just that: a business. Every business should always involve an excellent approach to customer service—but you won't continue to exist as a property owner if you don't cover your margins and leave some room to profit. Neglecting this element as an investor is how many otherwise long-term holders get shoved out of the industry—leading to less high-quality rental housing for all.
If your current renter ever asks that you justify your increase, simply explain that as the property owner in Lakewood Ranch, your costs are increasing; taxes, insurance, maintenance and repairs, professional fees—none of these services and expenses are trending downwards. Why should you be penalized as a result of needing to cover increasing overhead?
If you were feeling confrontational, you might ask your resident if their other living costs (such as utilities and groceries) are immune to inflation. However, as the experts in Lakewood Ranch property management, we happen to know that most property owners are more professional than that. Still, one benefit of working with full-service property management is that we serve as a professional buffer between you and all resident interactions.
You may even feel that raising the rent (even at the higher end of an increase) does not pay dividends. However, as our table below demonstrates, the cost of not raising rent each year can be significant! Even taking into account vacancy and additional maintenance expenses, the results are clear. If you want to stay competitive as a property owner in the Lakewood Ranch area, you should be evaluating the pricing for your single-family homes and multi-family investment properties now.
When to Not Raise the Rent for Your Lakewood Ranch Rental Home
Of course, there may be circumstances when it is in your best interests as a property owner to maintain an existing rental rate simply to secure a lease renewal. However, as a Lakewood Ranch property management company, we recommend that you should only do so on your terms—and not your renter's. Remember why you ventured into investment property ownership in the first place!
It's not a coincidence that the rental rates of self-managing owners are consistently lower than those of professionally-managed rental properties. Some may simply equate this to a self-managing owner discounting his/her rental rates in lieu of fees. But to what end?
Even if the net return worked out to be the same, surely it would make more sense to employ full-service property management to provide expert care for your rentals. Ultimately, having a 'middle man' for your investments ensures you'll always have the right research to back your rental rates—as well as the assistance of a professional messenger for handling any ire or turnover that may come about as a result of an increase.
These are not the only benefits of a Lakewood Ranch property management team. However, it is a great launching point for property owners interested in applying our skills! Let's get started with a free rental analysis to ensure you're pricing your Lakewood Ranch rental homes where they should be.