Rent Increases: Why Small Adjustments Matter

Nobody likes paying more for something. Residents don’t love rent increases, and as property owners, you probably don’t love seeing your costs increase either.

Owning rental property is a long-term investment, and one of the most important parts of keeping that investment financially healthy is making sure the income from the property keeps pace with the increasing cost of owning it. That is exactly why rents need to be reviewed annually.

Why Rents Go Up

Inflation affects nearly everything we buy. Groceries cost more. Gas costs more. Cars cost more.

Rental properties are not immune to inflation.

At the same time, owners have expenses that continue to increase year after year. Property taxes increase. Insurance premiums increase. The cost of repairs and maintenance increases. Labor, materials, appliances, flooring, paint, plumbing, electrical work and landscaping all cost more. And even during a year when the property doesn’t need a major repair, owners still need to be preparing for larger expenses that are coming.

Eventually, every rental will have a turnover. There will be vacancy between residents. The property may need paint, flooring, cleaning, landscaping or repairs before the next resident moves in.

And eventually, larger capital expenses arrive. Roofs wear out. Decks need replacement. HVAC systems fail. Water heaters don’t last forever.

A profitable rental property has to generate enough income not only to pay today’s expenses, but also to prepare for tomorrow’s.

“But If We Raise the Rent, They’ll Move!”

This is one of the most common concerns we hear from owners.

Sometimes owners become so worried about losing a good resident that they avoid increasing rent altogether. The intention makes sense: a good resident has value, and turnover is expensive.

But keeping rent artificially low isn’t necessarily the best way to retain a resident—or protect the investment.

Imagine market rent has gradually increased to $2,200, but a long-term resident is still paying $1,850 because the rent hasn’t been adjusted in several years. Eventually the owner realizes the property is $350 below market and wants to catch up.

Now the increase feels enormous.

There is also a financial cost to avoiding an increase. A $50 monthly adjustment is $600 per year. After several years of skipped increases, the lost income begins to compound while the property’s expenses continue moving in the opposite direction.

The most common reason renters move isn’t rent increases, it’s a change in lifestyle: moving to be closer to family, moving for a new job or moving to a different area of town.

Our Approach to Rent Increases

At Evergreen, we believe rent increases should be consistent. We also don’t believe the goal should simply be to charge the highest rent possible.

Before recommending an increase, we look at where your property currently sits in the market. We compare it with similar properties we manage, review competing rentals currently available on the market, consider the property’s condition and features, and evaluate the resident’s current rent against realistic market rent.

From there, we recommend an appropriate adjustment.

In many years, that may mean a relatively modest increase—often at least $50 per month—rather than waiting several years and trying to make one large correction.

There will also be years when the market doesn’t support an increase. Rental markets change, and our recommendations need to change with them.

Rent Increases Aren’t Just About Making More Money

An extra $50 or $100 per month isn’t simply “more profit.” Most of that additional income needs to offset increasing operating expenses. To help build reserves for the next turnover. To prepare for a vacancy. To be retained for the roof, deck, HVAC system, flooring or other capital improvement that will eventually be required.

Owning rental property means thinking beyond this month’s cash flow.

A property can appear profitable while slowly falling behind if rent remains stagnant while every expense associated with owning it continues to increase.

The goal isn’t to squeeze every possible dollar out of a resident. The goal is to keep the property financially sustainable for the long term while maintaining a rent that makes sense for the current market.

Rent Increases Are One of the Biggest Benefits of Having a Property Manager

This is also one of those areas where having a property manager really matters.

When owners self-manage, rent increases are usually avoided. You like your resident. They pay on time. They take care of the property. You don’t want to have an uncomfortable conversation or risk upsetting a relationship that is working well. So another year goes by without an increase. Then 2 years.

Before long, a property that should be renting for $2,200 is still renting for $1,850—not because that is the appropriate rent, but because nobody wanted to have the conversation.

Property managers don’t have that same emotional hurdle. Reviewing rent is simply part of managing the investment. Once a year, we evaluate the property’s current rent, compare it to the market, and determine whether an adjustment makes sense. If it does, we handle the notices, communication and implementation for you.

This is one of the biggest advantages of having a property manager: we do the things owners know they should do, but understandably don’t always want to do themselves.

A good property manager creates a buffer between the owner and the resident. You don’t have to personally tell a resident you like that their rent is increasing. We can make a business decision based on the property, the market and the long-term financial health of the investment—and then handle the uncomfortable part.

Property management isn’t just about collecting rent and coordinating repairs. It’s about consistently managing the property like an investment—even when that means doing something the owner might prefer to put off.

Small, thoughtful rent increases today can help prevent much larger financial corrections tomorrow.

That is how we approach rent increases at Evergreen: review the market, look at the numbers, protect the resident relationship, and make decisions with the long-term health of your investment in mind.