Calendar icon May 7, 2024

How to Write a Friendly Rent Increase Letter + Free Template

Before implementing a rent increase, it's essential to communicate with your tenants clearly and professionally. Writing a rent increase letter is a critical first step in this process. 

Due to inflation and the rising cost of living, rent adjustments have become increasingly important for maintaining the financial viability of a property. However, executing this task involves a delicate balance to ensure tenants feel respected and valued.

The key to this process? Transparency. By clearly communicating the reasons behind the rent increase, such as inflation and increased operational costs, you can help your residents understand the rationale behind your decision.

A note on language: Here at Second Nature, we prefer to use the terms "resident" and “residency” rather than “tenant” and “tenancy,” to emphasize the human element of property management work. However, there may be instances where terms such as "tenant" are used for legal or industry-standard purposes within documents or communications. In these cases, please know that our intent remains the same – to provide clear, accurate, and meaningful information to all people involved in the business relationship.

 

When Should You Increase the Rent?

Rent increases should be considered periodically to keep up with inflation and the rising costs associated with property maintenance and management. Specifically, inflation drives up the costs of utilities, repairs, and general upkeep, making it essential to adjust rents to cover these expenses. 

Other rising expenses include property taxes, insurance premiums, and even the costs of improvements – all contributing to the need for rent increases. By aligning rent adjustments with these economic factors, property managers can ensure the financial sustainability of their properties while continuing to provide quality living conditions for their tenants.

 

What to Consider When Increasing the Rent

There are several factors to consider to ensure fairness and transparency during a rent increase. These considerations will not only help in setting a rent increase amount that's justified, but also in maintaining a positive relationship with residents.

Rent competition

Understanding the rental market's competition is crucial. Evaluate the current market rates for similar properties in your area – this will help in setting a competitive yet reasonable rent increase that aligns with local conditions.

Lease term

Consider the length of the lease term currently in place. Typically, longer lease terms might warrant smaller, more gradual increases to retain residents, while shorter terms may allow for more frequent adjustments based on market trends.

Rent increase amount

Decide on a fair and justified level of rent increase. This should reflect market conditions, the property's value, and any improvements that have been made. Transparency about how this amount is calculated can help mitigate resident concerns.

State notice period requirement

Each state has specific legal requirements for notice periods before a rent increase can take effect. Ensure that you comply with these regulations to avoid legal issues and give residents enough time to adjust to the change.

Security deposit

Review the impact of the rent increase on the security deposit. In some states, the security deposit may need to be adjusted in accordance with the new rent amount. Ensure that any changes are clearly communicated and legally compliant.

Reasons to Send a Rent Increase Letter

Sending a rent increase letter is a necessary step in maintaining transparent and professional relationships with residents. Here’s why they're essential:

Legal compliance

A rent increase letter ensures compliance with state and local laws regarding notice periods and documentation. It serves as an official record of the change and helps protect against potential disputes.

Clarity and transparency

Providing a written notice offers clarity to residents about the new rent amount, the effective date of the increase, and the reasons behind it. This transparency helps maintain trust and minimize misunderstandings.

Professionalism

A formal rent increase letter reflects a professional approach to property management. It shows that you respect your residents and are committed to clear and open communication.

Justification of increase

The letter is an opportunity to explain the rationale behind the rent increase. Whether it’s due to rising maintenance costs, property improvements, or market adjustments, providing these justifications helps residents understand and accept the change.

Recordkeeping

Documenting rent increases helps in maintaining accurate records for the property manager, the property owner, and the resident. This can be crucial for future reference, renewals, or if any legal issues arise.

 

By considering the factors that go into the rent increase and clearly communicating the reasons, property managers can ensure a smoother transition and foster a positive relationship with their residents.

 

What Should a Rent Increase Letter Include?

Here's what should be included in a rent increase letter to ensure your residents have all the information they need:

1. Friendly tone

  • Use a warm and polite greeting.
  • Express appreciation for the resident's tenancy.
  • Maintain a respectful and understanding tone throughout the letter.

2. Resident information

  • Clearly state the names of the residents you're addressing.
  • Include their address.
  • Mention the end date of their current lease agreement. 

3. Clear announcement of rent increase

  • Precisely state the effective date of the rent increase. 
  • Clearly outline the new monthly rent amount. 
  • If applicable, mention any changes to additional fees like utilities, parking, or pet rent.

4. Justification for the increase (transparency is key!)

  • Highlight specific reasons for the rent increase. This could include rising property taxes, increased maintenance costs due to inflation or repairs, market value adjustments based on comparable rentals, or significant property improvements you've made. 
  • Be specific and provide data or evidence to support your claims whenever possible. For example, mention the percentage increase in real estate property taxes or highlight the specific property improvements that are enhancing the resident's living experience. 

5. Consequences of nonpayment

  • Clearly explain the consequences if the new rent amount is not paid by the specified date.
  • Outline the potential late fees or penalties that may apply.
  • Describe the steps that'll be taken if non-payment persists, such as the issuance of a notice to vacate or potential eviction proceedings.
  • Emphasize the importance of timely communication from the residents if they foresee difficulties in making the payment, and encourage them to discuss potential solutions or payment plans.

6. Resident options (maintain a positive tone)

  • Briefly remind residents of their right to review their new lease agreement.
  • Express your willingness to answer any questions they may have regarding the rent increase. 
  • Clearly state your contact information (phone number and email address) for easy communication.

Sample Rent Increase Letter Template

Below is a template you can use for your rent increase letter. Simply customize the highlighted sections with your specific information.

[Your Property Name and Contact Information]

[Date]

[Resident names]

[Address of rental property]

RE: Rent increase effective [effective date]

Dear [Resident names]

This letter is to inform you of an upcoming rent increase for [property address], effective [effective date]. Your current monthly rent of [current rent amount] will be adjusted to [new rent amount]. Additionally, [mention any changes to additional fees, e.g., "the monthly pet fee will increase to $XX"].

We understand rent increases can be disruptive, and we want to be transparent about the reasons behind this adjustment. The increase is necessary due to [list specific reasons for the increase, e.g., "rising rental rates for comparable units… ," or “neighborhood revitalization resulting in enhanced value…”]. [If applicable, provide data or evidence to support your claims]. 

We value you as a resident and appreciate our relationship. You have the right to review your lease agreement if you have any questions about its terms. We are also happy to answer any questions you may have regarding this rent increase. Please feel free to contact us at [phone number] or [email address].

Sincerely,

[Your name and the name of your property management company]

 

For example, our rent increase template looks like this: 

rent increase letter template

 

How To Send a Rent Increase Letter

Delivering a rent increase letter requires a balance between convenience and ensuring you have verifiable proof of the notification. First and foremost, you’ll need to consider local regulations. Ideally, consult with a lawyer specializing in landlord-tenant law to determine the mandated method for delivering rent increase notices.

Some states or municipalities may require certified mail or another verifiable method (e.g., signed delivery receipts with regular mail). Don't skip this step – non-compliance with local regulations can lead to legal issues down the line.

Delivery method options

  • Certified mail: This is generally the safest option. Certified mail provides a receipt confirming the letter's delivery and the date it was received. This documentation can be crucial in case of future disputes or legal proceedings. It's typically more expensive than regular mail, but the added security it offers can be worth the cost.
  • Regular mail with signed delivery receipt: This option offers some level of proof of delivery but may be less secure than certified mail. Residents can potentially refuse to sign for the receipt.
  • Hand delivery: If feasible, handing the rent increase letter to the resident in person and obtaining a signed receipt is the most secure method.

Note that while some residents might appreciate the convenience of email, this isn't always the most reliable notification method. Consider your residents' demographics and preferred communication channels.

In any case, the original lease agreement you have with your residents should explicitly state acceptable methods for delivering important notice letters, including rent increases. For instance, if lease terms include email as an acceptable form of communication, then you can choose to use it for rent increase notifications.

A note on property management software

Property management software can be useful for maintaining a centralized repository of all your communications with residents, including rent increase letters. It's also a useful tool for furnishing clear audit trails and documentation in case of disputes. You should, however, remember to make updates if the software handles rent collection reminders, in order to reflect the conditions of your new rental agreement.

Rent Increase FAQs

Q: How many days’ notice of rent increase do residents need to be given?

A: The required notice period for a rental increase can vary depending on your location and the terms of your lease agreement. In general, most states require that residents be given 30 to 60 days' written notice before a rent increase takes effect. This can vary for year-to-year lease renewals vs. month-to-month. It's important to check local rent control regulations for specific details on timeframes. 

Q: Can the rent increase be contested?

A: Depending on your location and specific circumstances, residents may have the right to contest a rent increase. For example, rent control laws in some jurisdictions allow residents to challenge rent hikes that are deemed to be excessive (statewide in California and Oregon, or locally in New York, New Jersey, and Maine). It's best to obtain legal advice from lawyers specializing in applicable local laws and state laws to understand your options. 

Q: What resources are available for residents?

For residents who ask about their rights or renting in general, here are some resources you can provide:

  • HUD Tenant Rights: The U.S. Department of Housing and Urban Development (HUD) website offers a wealth of information on tenant rights, including resources on rent increases and eviction processes.
  • Local tenant rights organizations: Many cities and states have local tenant rights organizations that can provide residents with specific guidance and support for renters based on their location and situation.

 

 

Happier residents

 

Final Thoughts

Prioritize clear communication and transparency, and you’ll find you can navigate rent increases effectively, while ensuring a healthy and positive relationship with your residents. 

These communications are a unique opportunity for positioning with your residents by reconnecting on terms, updating expectations, and more. The way you compose these letters – and the way you position the changes – can make all the difference in your renewal rate and resident satisfaction. 

It’s also the perfect opportunity to introduce a Resident Benefits Package (RBP) and remind residents of your role in adding value to their living conditions. Learn more about the benefits of Second Nature’s fully managed RBP.

Keep learning

Chambers Theory Endorses Second Nature’s Resident Benefits Package

Chambers Theory is a world-renowned property management team with clients in more than 30 countries worldwide. They specialize in serving the U.S. military, State Department, and Foreign Services families. Their motto “Real Estate With Intelligence” is more than just a saying. It’s on full display through the introductory videos for landlords and residents on their website in seven languages (Spanish, Portuguese, Italian, Vietnamese, French, Croatian, and English) - all spoken fluently by their own property management (PM) team. Since its founding in 2018, Chambers Theory has been achieving extraordinary performance benchmarks. They’ve led the marketplace in delivering the “Golden Triangle of Success” to their clients, which means the lowest vacancy, the highest average rents, and the highest quality of tenants of any property management firm in its same service area. They’ve also donated over $100,000 to local charities and community organizations, while also leading the way in promoting sustainability practices in real estate and property management services. Their outstanding team attributes their success to their ability to develop and utilize their emotional intelligence skills to capacity to care with all their interactions with both landlords and residents. That’s why they fully endorse the Resident Benefits Package at Second Nature! Find out more about what a Resident Benefits Package is, its benefits, and how it can help create a Triple Win for you, as well as your residents and investors. Related: The State of Resident Experience Report

Calendar icon July 18, 2024

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Investor Experience Platform™️ IXP™️

An Investor Experience Platform™️ (IXP) in property management is a suite of products, services, and benefits offered by property management companies to property investors. Just like a resident benefits package is a way to drive value for residents, investors, and property managers, the IBP™️ is an innovative approach to property management that focuses on driving value for an investor's assets and turning that value into profit for the property management company. In this article, we’ll dig into the different features that an Investor Experience Platform™️ can include, and how those benefit not just investors, but property managers and residents, too. What Is an Investor Experience Platform™️ (IXP)? As stated above, an Investor Experience Platform™️ (IXP™️) is a comprehensive suite of services that offer property investors higher quality property management, stability, and profit. An IBP™️ typically includes concierge-level services beyond basic property management – such as property insurance policies, eviction guarantees, rent guarantees, maintenance plans, asset performance reports, etc. These services are aimed at maximizing the investor’s assets, stability and convenience, profitability, and peace of mind in managing their properties. They're commonly managed through an investor experience platform to securely manage and monitor the performance of these assets online, which we'll discuss later. The first step to outlining an IBP™️ is to define what your basic management fee means and covers. If the answer is, it’s collecting rent, handling maintenance, and general communication – does that include maintenance coordination or is that a separate fee? Does it include asset reporting or is that an additional service? In your management agreement, define what the management fee is, what it covers, and how much it is. An IBP™️ can be an effective tool for articulating the new and differentiated things that an investor wouldn’t be able to do on their own and that you are offering beyond basic property management. Articulate your unique and differentiated services (IBP™️) and use that as a tool for positioning and charging for what it’s worth. What’s Included in An Investor Experience Platform™️? An Investor Experience Platform™️ should include a range of solutions to help deliver consistency, insight, and asset protection to a property owner’s portfolio. After all, professional property managers don’t have to be functional managers of a home – they can be strategic partners in the management of financial assets. You might hear services similar to the IBP™️ called an “owner benefit package,” but at Second Nature, we believe that the “investor” term is useful in encouraging a longer-term mindset, and emphasizes the economic value professional property management can bring. According to Eric Wetherington, VP of Strategic Initiatives at PURE Property Management: “As property managers, we need to think more like asset managers. This client made an investment, and we should be guiding that client through managing that investment, not just collecting rent.” To build and manage a winning IBP™️, property managers need an Investor Experience Platform that unlocks scalable product and service customization, digitized onboarding, accounting policy automation, and more. In addition, Investor Experience Platforms provide transparency and convenience for your investors. Here are some of the most valuable services that property managers can offer through an innovative Investor Experience Platform™️. Property insurance program Similar to offering a renters insurance program through an RBP in the lease agreement, property management companies can offer an insurance plan to investors to cut costs and ensure the safety of their assets. Most management agreements will include the requirement that the investor carries insurance on the property and that the property manager is additionally insured. But what if you as the property manager could help manage that for the investor – at scale? Property Insurance for investors should have dynamic pricing based on individual investors’s property portfolio and needs. The benefit beyond flexibility is the savings they’ll see on their premiums while also getting insurance that’s tailored to the needs of their specific property class. At Second Nature, we work primarily with single-family rental properties and small multi-family residences. Property Insurance Programs can bring scale that will drive economic value for the investor over what they could get retail on their own. They’d still have the option to go get their own insurance that meets requirements, but they can pay you a small fee to manage it for them. Rent guarantee An IBP™️ can include a number of financial guarantees to protect property investors and drive ancillary revenue for PMCs. A rent guarantee, or rent protection, ensures a consistent rental income to investors by protecting them against resident defaults or non-payment of rent. If a resident fails to pay rent, the property management company covers the unpaid amount and takes necessary steps for eviction or collection, providing financial security and minimizing the risk for property owners. Rent guarantees work for professional property management companies that have enough properties to balance the loss of rent if a resident doesn’t pay. The risk is low and the additional profit from fees for this guarantee can have a very high ROI, while driving satisfaction and stability for the investor. Plus, if you’re using services in an RBP to help incentivize on-time rent payments, you’ll rarely find yourself out in the cold. Eviction protection guarantee An eviction protection guarantee also goes beyond the normal scope of property management services and can be used as a secondary source of revenue. Eviction Protection is a service provided by property management companies to property investors that offers additional security and financial protection in the event of an eviction. Under this guarantee, the property management company assumes the costs associated with the eviction process, including legal fees and court expenses. It helps alleviate the financial burden on property investors and provides peace of mind by ensuring that they are safeguarded against potential losses resulting from resident evictions. The eviction guarantee helps protect property owners from the complexities and potential costs associated with evictions, ensuring a smooth and efficient resolution to tenant-related issues. Pet guarantees & other guarantees A pet guarantee is a service offered by property management companies to property investors that aims to address any potential issues related to allowing pets in rental properties. It typically involves implementing policies and procedures to ensure responsible pet ownership, such as thorough pet screening, pet agreements, and collecting additional pet deposits or fees. The pet guarantee may also include services like pet damage insurance or assistance with pet-related issues during the lease term. It provides property investors with a framework to accommodate residents with pets while minimizing risks and maintaining the condition of the property. For many residents, finding a pet-friendly apartment increases retention and profitability. They’re willing to stay longer and pay more for a pet-friendly place. And–get this–pet damage is less likely to happen than damage from kids! It’s not a huge risk to the asset, but can provide a big benefit in terms of satisfied, longer-term residents. Maintenance plan Home warranties are a four-letter word for property managers. They’re a massive headache to deal with, and yet there’s high demand for them among property investors. Because of that, most property managers charge a fee for home warranties, for each they have to file. Imagine if there was a world where home warranties weren’t needed. Here’s the thing: Professional property managers already have the vendor network and the know-how to coordinate maintenance jobs. What they don’t usually have is a product that’s priced to give the investor the experience they want. Let’s say right now an investor is paying $50 a month for a cheap home warranty. The warranty only covers 40% of issues and it creates all these extra people and friction in the middle. For anything moderately significant that goes wrong with a property, PMCs generally must contact the investor for permission to get work done. It’s all a massive hassle and loses time in maintenance requests that leave residents frustrated. What if there was a product that costs, say, $150 to $200 a month but it actually covered everything? Instead of having sudden expenses and emergencies, this maintenance plan smooths out the experience and makes it more predictable for the investor. For PMs, it means taking the initiative on fixes without waiting for approval. Imagine a world where you didn’t have to get owner approvals for 95% of maintenance issues – because they’re already budgeted for and already paid for. For residents, it means better maintenance, and faster. Another Triple Win! Asset performance reports Another piece focuses on property managers as asset managers. Think about any investment app, like Robinhood, Acorns, etc. You can log in to these apps any time, 24/7, and see how your stock and investments are performing. In most investment classes, you can see in real time how your assets are performing. Why shouldn’t property investors have that as well? An IBP™️ can include exactly that: a dashboard or online portal that shows investors regular reports on how their property is doing. They could get updates on the value of their home over time, the home price appreciation, rent price over time, and project rent growth, typically maintenance costs and how they’re doing against that, and more. Resident Benefits Package Another piece to include in your IBP™️ is to highlight the benefits of your resident benefits package to your investors. Explain how features like a filter delivery program protect their assets and reduce HVAC repair costs. Show how a renters insurance program can ensure coverage and protection. Give numbers on how credit reporting incentivizes on-time rental payments and helps ensure financially stable renters. Explain how a movie-in concierge saves both time, headache, and money. Each of the pillars of an RBP is critical to encouraging better resident behavior, increasing renter retention and lease renewal rates, reducing vacancies, and more – all primary goals for a property investor. A note about Rent Advance Programs There’s been due buzz about “Rent Advance” offerings, though many advise caution when approaching this financial product. It works in some ways like cash advance programs, which can satisfy urgent needs, but not be more valuable for anyone long term. The way it works is PMs offer to send a year of rent upfront to the investor in a big chunk, and collect monthly from the resident. The investor typically pays a 5-10% premium on the advance, which can be their entire expected return. So the question becomes, where do they put that cash to get a better return instead? Another thing to think about is who would actually use this product. Investors who don’t have enough cash on hand? How does that benefit anyone in the long run? What happens when there’s a big maintenance bill later? Does this encourage better decisions and practices by the investor? To date, there’s been pretty low adoption of this program, which is another sign it may not be hugely beneficial to everyone involved. But plenty of innovations start that way, evolve, and find traction. One case where it might be a value generator is if an investor is looking to take a cash advance and put it toward a down payment for another house. That would benefit the property manager as well, promising more business, and the PM could offer a lower rate for getting more properties to make the financing more attractive than hard money loans or other alternatives. The jury is still out here, it’s an interesting one to track. How Can Investors and Property Managers Benefit From an Investor Experience Platform™️? Investors and property managers can benefit from an Investor Experience Platform™️ in several ways. They’re also great for residents in the sense they build more stability and quality into the renting process. Here are just some of the benefits of an IBP™️. Enhanced investor attraction An Investor Experience Platform™️ provides incentives and advantages that can attract more investors. Financial guarantees and protections against the risks associated with evictions or late payments can increase stability, while services like a maintenance plan can ensure premium care of their property assets without increasing their workload. By offering attractive perks, property managers can differentiate their offerings and generate greater investor interest. Increased investor retention Both IBP™️s and RBPs help build loyalty with residents and investors. By fostering a strong relationship and demonstrating ongoing value, property managers can build trust and loyalty among investors, and retain them over the long term. IBP™️s help establish the stability, transparency, and asset growth for a real estate investment that an investor hopes to achieve. Improved property performance An Investor Experience Platform™️ can also contribute to improved property performance. For example, by offering discounted property management fees or access to professional services at reduced rates, property managers can help investors optimize their returns and reduce costs. Additionally, incentives such as rent guarantees or eviction protection can mitigate risk for investors and attract more capital to the property. Streamlined communication and transparency A well-designed Investor Experience Platform™️ facilitates effective communication and promotes transparency between property managers and investors. This can involve regular reporting on financial performance, property updates, and the sharing of relevant market insights. Transparent and consistent communication builds trust and confidence among investors, fostering a positive and long-lasting relationship. Competitive advantage A comprehensive Investor Experience Platform™️ can give property managers a competitive edge in the market. When investors have access to exclusive benefits and advantages, they are more likely to choose a property managed by a company that offers a compelling package – and to recommend it to others. Say hello to increased investment inflow and a stronger market position for your PMC. Should You Make an Investor Experience Platform™️ Mandatory? The first thing most property managers ask us when we’re talking about an RBP or an IBP™️ is: Should I make this mandatory for all investors or do I make it a flexible opt-in/opt-out program? Unlike RBPs, where best practices are more proven and established, different PMs are taking different approaches with their IBP™️s. Some have a mandatory level of service set at a flat price. Others may say they’re fine offering a base level of service without these differentiated products, giving investors the choice to simply pay a baseline management fee and opt out of the IBP™️ premium service. Some may offer a baseline to all investors and then give them the chance to opt in for premium IBP™️ services. There are a lot of ways to do it. With the RBP, we’ve found that making it mandatory does not generate nearly as much pushback as people expect – and can be a strong value add overall. Final Thoughts About an Investor Experience Platform™️ The Investor Experience Platform™️ is an innovative way to generate ancillary income and create more value for investors and residents. Similar to Second Nature’s premier Resident Benefits Package, the IBP™️ can deliver high-quality service for investor experience – and help create a triple win for investors, residents, and property management companies. The IBP™️ reinforces the value of a professional property management company for investors and helps differentiate you from the crowd. Stay tuned to learn more about the latest in the IBP™️ space, or learn more about how a resident benefits package can launch a whole new level of value for your PMC.

Calendar icon July 17, 2024

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