Increasing rent each year is a common practice for many property managers. And when the time comes, you need to write a rent increase letter to tenants informing them of the change.
Many states have rental laws that stipulate how much you can raise a tenant's rent, when you can increase rent and how and when you're required to notify tenants that their rent is going up. Standardizing this process will help you apply rent increases consistently and equitably for all your tenants.
Not sure how to write a rent increase letter? Here's an overview of what the letter should include, how to send it and when to deliver the notice to your tenant.
Reasons to raise a tenant's rent
If you're planning to raise rent sometime soon, you're not alone. Over the past year, rent prices have crept up about 20 percent nationwide, according to ApartmentGuide. The reason is that there are fewer rental properties available and a large number of renters are looking for affordable properties. Keeping up with the local real estate market is one reason property owners increase rent each year.
You might also raise the rent if there's a rise in property taxes, insurance, homeowners association fees or utility prices. Another reason is if you made significant upgrades or repairs to the home. Increasing rent can help cover some of these expenses.
You can't increase rent for retaliatory or discriminatory reasons, however. The federal Fair Housing Act prohibits discrimination in housing based on race, religion, color, national origin, family status, sex or disability. Raising rent based on how many children a family has could violate this law, for example. Many states prohibit rent increases solely because you had a negative interaction with the renter.
How much can I raise the rent?
In October 2021, rent for a one-bedroom apartment averaged $1,660 nationally and $1,964 for a two-bedroom. The average rent increase is usually 3 percent to 5 percent a year. If rent is $1,660 a month, an increase would be $49 to $83.
In most cases, property owners can technically increase the rent as much as they want, but only by a reasonable amount. Raising rent too much could turn off a great tenant, and it will likely cost more to have the apartment sitting vacant.
When deciding how much to increase a tenant's rent, it's best to start with your local landlord-tenant laws. Some states or municipalities may cap rent increases or not allow rent to exceed a certain amount, especially if the property is rent-controlled.
When is the best time to increase the rent?
Property managers can't raise the rent on a whim or in the middle of a lease term. When a tenant signs a lease, they agree to a specific rent amount for a certain timeframe. Some leases specify how rent increases work and how much rent will go up. Rent increases should occur once the lease term ends, which is usually every 12 months.
You can propose a rent increase ahead of a lease ending with it going into effect once the term expires — however, the tenant doesn't have to agree to it. The renter can choose not to renew the lease with higher rent and move out. If they stay in the home after the lease expires, you have the right to go through the eviction process.
When to send a rent increase letter
You must provide tenants with written notice before raising the rent. State laws specify the timeframe for when you should send the notice, but it's usually 30 days before a lease term ends or when the increase will take effect. Then, give renters time to respond to the notice — if they agree to the rent increase and will renew their lease or they're not renewing and plan to move out.
How to write a rent increase letter to tenants
A rent increase letter serves two purposes. It notifies tenants that their rent is going up and is official documentation that you notified them of the increase within the required timeframe.
When writing a rent increase letter, keep the tone professional but friendly — and be clear and direct. Make sure your letter includes these elements:
- Name of the tenant
- Property address
- Name and contact information for the property manager (or property owner)
- Date of the letter
- Date the rent increase will go into effect
- Amount of the rent increase
- Amount of the current rent
- Date first new rent payment will be due
- Mention the current lease agreement's expiration date
- Include a timeframe for when the tenant must notify you that they're not renewing their lease
Sample rent increase letter to tenants
[Property manager or owner name]
[City, state, ZIP Code]
[Phone number and email address]
[Date of notice]
[City, state, ZIP Code]
Dear [Tenant's name],
This notice is to inform you that beginning [date the rent will increase], the monthly rent that you pay to occupy the unit at [property address] will increase if you choose to renew your lease. Your current lease expires on [date of lease expiration].
The current monthly rent is [amount of current rent] and your new rent amount will be [amount of new rent]. The first payment at the new monthly rent amount will be due [include date payment is due].
Please let us know if you agree to this increase. Check one of the boxes below and sign and return this notice to the address provided by [date to return the notice]:
I agree to the rent increase of [amount of new rent] effective [date the rent will increase]. Please send me a lease renewal.
I do not agree to the rent increase and will vacate the unit by [date to move out], as specified in the lease agreement.
Please let us know if you have any questions about this notice.
[Property owner/manager's name]
[Property owner/manager's signature]
How to deliver the rent increase letter
Check with your local laws to see if you're required to deliver a rent increase notice via a certain method. You can hand-deliver the notice by leaving it on the tenant's front door.
If you mail the rent increase letter, send it certified mail, which provides confirmation that the tenant received it. Email is another option. Just make sure you include a read receipt to ensure they received the message.
Play by the rules
Increasing rent is a standard part of running a rental property. You just need to make sure you're following all state and local laws regarding how much and when you can raise rent and how to notify tenants.
When you list the property with Rent.com, you can collect rent online, as well as accept applications and screen tenants.