Can I raise the rent in the down economy?

Situation

The cost of your rental unit continues to increase due to increases in taxes, maintenance, insurance and just about everything connected to your property.  But with this down economy, can you really raise rents?

Response

There are many factors to consider when you want to increase rents.  While your costs may be rising, your tenant or potential future tenants are also experiencing cost of living increases and that factor must be considered.

The biggest factor is what is happening in your market.  If your current tenant decided to move to a similar unit in a similar neighborhood, what would he have to pay for rent?  You can figure this out by going to some of the internet rental sites that specilize in your type of property and compare. 

If your tenant can rent the same home in a similar neighborhood for a lot less than what you are charging, then your tenant will probably move.  If comparable property rents for a little less, the tenant may or may not stay.  If the rents are higher, he will stay. 

The trick is to balance the rent you are charging with the rents in the area.  If you want to be sure that your tenant stays, keep the rent a little below that of other units on the market.  If you are willing to take a little risk, keep your rents at the same rate as other homes in the area.  If you don't care if you lose the tenant, raise the rents above the market.

Keep in mind that having a vacancy is expensive.  It takes about 2 months to rent a unit after it is ready to rent.  It costs a fair amount of money to fix up a unit after a tenant leaves.  If the tenant has been there for several years, it could cost thousands to paint, install carpet and blinds and replace all of the other things that have worn out over the years.

If you decide not to raise the rents, I would suggest that you advise the tenant that you feel they are great tenants and that you invite them to sign a new 1 year lease at the same rate because they are such good people. 

Another thing to consider is whether you community has any rent control limitations on raising the rent.