Should I increase the rent?
Should I increase the rent?
We are in tough market conditions in BC at this time and it is not the first time we have experienced this.
I often tell clients of a story not long after the 2008 financial crisis. That market was similar to the current market. Against our advice a landlord requested we increase the rent by the allowable amount which was about $50 per month at that time. The unit was rented for $2400 but the current market had comparable properties listed for around $2100. We sent the tenant the rent increase notice and immediately the tenant gave notice to vacate.
A potential new renter offered $2100 to start a new tenancy the day after the old tenant moved out, which our client refused. Our client demanded we rent it for $2500. Six months later we rented the unit for $2100. The landlord lost over $14,000 seeking a $50 rent increase.
Rent increases are important when rents are stable and or continuing to increase. If rents are increasing in the market and you are not raising the rent a property will quickly be hundreds of dollars below the current market rent. At the other end if you raise the current rent in today’s market where the rents are decreasing everywhere tenants may take the opportunity to move. The market has an excess of product and tenants have the time and choice to make a decision to move or not to move. It has been about a year now since we rented a property to a tenant who did not have to provide notice to their landlord after signing a lease to rent our properties.
If you are trying to raise the rent for the sake of the increase you may need to be prepared to receive less rent and have a vacancy for multiple months in your property. We are advising landlords if tenants are good people and they want to stay, negotiate a lower rent in return for another fixed term lease. That way the landlord gets a commitment for another fixed term, usually a year and the tenant gets some stability in the market.
The market will only pay what the market is willing to pay. Meaning you may want to rent your place for $3000 to meet your expenses but if the market is only willing to pay you $2500 for your property it will sit vacant for a very long time waiting for the person to pay $3000.
In markets like this where rents are on a decline, each month you wait the price you will obtain decreases. Pricing your property correctly in today’s market is very important.
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