As a consumer in the world, you never like to have prices go up, do you?
And yet, it’s an essential part of doing business, whether you’re the provider of goods and services or the person who needs them.
Rent increases are necessary, especially if you want to continue making money on your investment property. Not only are you trying to protect your own profits, but you’re also keeping up with the rising costs associated with leasing, managing, and maintaining a rental property.
Most residents are likely to expect an increase in rent when a lease renewal is signed. But they’re not going to be thrilled about it.
How do you know what the right rental increase is?
It depends largely on the market, of course. And no one knows the local rental market like your local property management partner.
As your Real Estate Gladiators, we’re here to protect you against the risk of low-balling your rental increase. We’re also going to protect you from setting a rental increase that’s too high, and likely to risk pushing your residents out the door.
Let’s look at how professional property managers like us determine what a rental increase should be.
Washington’s State Lack of Rent Control
For a state that’s so committed to tenant protections and resident rights, there’s no rent control in place in Washington. In fact, it’s illegal on a statewide level. The law also prohibits local cities and municipalities from implementing their own rent control measures.
That means you can raise the rent as much as you want when it’s time to implement a rental increase.
There’s been some talk about the state legislature resurrecting a stabilization bill that died last year.
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Proposed Rent Stabilization Bill The bill that’s been introduced in the House this year includes a 7% cap on yearly rent increases for existing tenants, with some exceptions, including buildings operated by nonprofits and residential construction that is 10 years old or less. This bill would also require landlords to give 180 days’ notice before an increase of 3% or more and limit some move-in and deposit fees. |
The arguments for and against this bill are predictable:
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Supporters say the proposal would offer tenants some relief from dramatically rising rents and alleviate homelessness. |
Against
Opponents say a rent cap could only worsen Washington’s housing shortage by dis-incentivizing new development. |
For now, there’s nothing to prevent landlords from raising the rent as much as they’d like outside of market demand. Making an unreasonable rental increase will leave your property vacant, but it won’t mean you’re in violation of any state or local laws.
When Should You Raise the Rent?
Before we launch into our suggestions on determining rental amounts and increases, let’s think about why you’re raising the rent at all. Timing is everything.
Washington requires landlords to provide at least 60 days’ written notice if rent will increase by any amount. Timing your increase really begins with your lease agreement. Rent increases cannot occur during an active lease unless the lease explicitly includes provisions that allow it. Otherwise, increases typically happen when transitioning to a month-to-month or on lease renewal.
The specific location of your rental property can also impact timing. Seattle landlords, for example, are required to provide 180 days’ written notice for a rent increase. Always verify whether your city or county has additional rules in place. Understanding these guidelines helps you avoid legal disputes and maintain positive landlord-tenant relationships.
Questions can always be brought to us – your Real Estate Gladiators.
Knowing the legal framework is just one piece of the puzzle; timing your rent increase strategically is equally important. Here are some of the scenarios where raising the rent might be appropriate.
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At the End of a Lease Term Obvious and also the most common time to raise rent: when a lease term is coming to an end. This provides a natural opportunity to adjust the price while giving tenants the option to renew or move out. Be sure to provide ample notice as required by law so tenants can make informed decisions. |
When Market Demand Changes If nearby rental properties have higher rates, it may be time to adjust your rent accordingly. Conduct a rent comparison analysis by reviewing similar properties in your area to ensure your increase aligns with local market trends. This is best done with a vacant property that you’re preparing for the rental market. |
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After Making Property Improvements Have you recently upgraded your rental home? Enhancements such as modern appliances, updated heating systems, or better security features often justify higher rent due to the added value. Be transparent about these improvements when informing tenants of the new rate. Make sure the increase complies with your lease agreement if there’s one in place. |
To Account for Rising Costs Let’s say you converted from a lease to a month to month agreement and didn’t raise the rent. But now, operational costs like property taxes, maintenance, or insurance have increased significantly. A rent adjustment may be necessary to maintain profitability. Clearly communicate these reasons to your tenants, as they’re more likely to understand if they see the reasoning behind the increase. |
Timing matters. Many landlords choose to increase rent during peak rental seasons, such as spring and summer, when demand for housing is typically higher. A well-timed increase can reduce the likelihood of having a vacant property.
How Much is the Right Amount?
Increasing Rents on Washington State Investment Properties
Renewing a lease on an investment property is the perfect opportunity to reevaluate your rental pricing. A well-calculated rental increase not only boosts your income but also keeps your property aligned with market expectations.
However, navigating this process can be tricky. Raise the rent too high, and you may lose a reliable tenant. Set it too low, and you could miss out on maximizing returns.
Let’s look at the rental increase strategies that we’ve found to be especially useful as property management experts. You’ll find that with this type of support, the increase you propose is both profitable and fair.
| Why Should You Adjust Rent?
Before we jump into the “how,” let’s quickly discuss the “why.” Rental increases are not just about pocketing more income. They are necessary for:
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Key Factors to Consider When Deciding on a Rental Increase
Here are the primary metrics and considerations to evaluate before determining how much to increase a tenant’s rent.
- Research Market Trends
Start by assessing how much similar properties in your area are renting for. You might have a pretty good idea of how much more you want to be earning on your property, but those projections mean nothing if they are not supported by the local rental market.
A lot of owners will use websites like Zillow, Realtor.com, and Rentometer to get an idea of where locally competing properties are setting their rents. These are great tools for quickly analyzing rental benchmarks in your location. However, you want to dig a little deeper into the data in order to be sure you’re working with a smart and accurate data set.
Contact us when it’s time.
We have insights and analytics that are being updated all the time to reflect the current state of the market. That rental home similar to yours that has a higher-than-average rental value? It could be vacant for a long time. It might have unqualified tenants in place, who were willing to pay the higher rent because they could not get approved anywhere else.
With our technology and our abundant data, we’re keeping an eye on:
- Properties with similar square footage and amenities.
- Trends reflecting seasonal spikes (e.g., spring upticks) or any economic fluctuations.
This gives you a baseline and ensures your rental increase aligns with market expectations.
- Account for Inflation and Expenses
Inflation impacts your operating costs and should factor into your decision. For instance, if annual inflation is around 3%, consider reflecting this in your new rent. Additionally, calculate rising amounts for:
- Maintenance and repairs
- Homeowners’ association (HOA) fees
- Property taxes and management fees
By covering these costs incrementally, you protect your income from erosion.
Inflation has been blamed for higher rental values all across the country over the last couple of years. While its impacts are hurting residents as well as owners, you don’t want to put yourself at a disadvantage. Follow the market. Even with inflation still higher than we’d like it to be, a lot of rents have begun to stabilize. Don’t raise the rent too much in the name of inflation if other properties are not doing the same.
- Evaluate Tenant Value
How committed are you to keeping your residents in place?
This impacts pricing and rental increases.
It’s important for rental property owners to remember that not all tenants are easily replaceable. A responsible, long-term tenant is worth keeping your rental increase on the reasonable side. If you are renting to a responsible individual who pays on time and keeps the unit in excellent condition, weigh the potential risk of vacancy against the benefit of a steep rental increase.
Here’s an example:
A 10% rental hike might push a valuable resident to move out, leaving you with a vacant unit that takes months to refill. You’ll end up losing a lot more than you’d gain with the larger increase. On the other hand, a modest 3–5% increase could retain a tenant while offsetting your costs.
Be mindful of fair housing. If you have two tenants in the same building with lease renewals coming up at the same time, you cannot offer one tenant a lower rental increase than the other simply because you’re more interested in keeping that tenant and not so much the other one. This could raise questions about why you chose to set a certain increase for one tenant but a higher increase for the other.
- Offer Incentives for Renewals
You may encounter residents who are looking to negotiate. That’s not necessarily a bad thing.
If you’re implementing a rental increase, a small perk can soften the impact. Consider offering something meaningful, such as a minor improvement or an upgraded appliance. Perhaps your resident wants new carpet before they’re willing to renew the lease and pay the higher rent. If the carpet is worn and would need to be replaced anyway during a turnover, it’s wise to do it. Maybe a tenant wants a new microwave or a reduced pet rent. Consider these things carefully, especially if it means the difference between keeping and losing a good resident.
Convenience is a huge incentive for residents as well. If you’re not already offering online payment options, this is a good time to roll it out. Maybe offering a nine-month renewal or an 18-month renewal option will entice tenants to stay in place even while paying more to live in the home.
These incentives remind the residents you’re working with that they are valued, which often strengthens the landlord-tenant relationship.
Striking the balance between profitability and tenant satisfaction strengthens your cash flow and the longevity of your property’s income stream. Rental increases, when executed strategically, enable you to grow wealth steadily while retaining high-quality tenants.
Communicating Rental Increases to Residents
An appropriate rent increase is only part of the equation—how you communicate with residents has a significant impact on maintaining a positive relationship. Here are best practices to follow when notifying tenants about a rent increase:
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Provide Written Notice Always provide a formal written notice of the increase, ensuring compliance with the 60-day requirement in Washington (or 180 days in Seattle). |
Be Transparent Explain why the rent increase is necessary. Whether it’s due to higher operational costs, property upgrades, or market adjustments, being upfront builds trust and reduces potential conflict. |
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Acknowledge Their History If the tenant has been renting for a long time or has consistently paid on time, take the opportunity to thank them for being a valued tenant. |
Offer Incentives For tenants who might find the increase challenging, offering perks (we mean an extended lease or minor upgrades) could help smooth the transition. |
How Property Management Helps with Rental Increases
A professional property management company plays a crucial role in simplifying and optimizing the rental increase process. By leveraging expertise and market insights, property managers can assess the current market conditions and provide precise recommendations on rental adjustments to keep your property competitive and profitable.
Additionally, your property management partner will ensure that all rent hikes comply with local laws and regulations, minimizing legal risks for property owners. From drafting legally sound lease amendments to effectively communicating changes with tenants, a property management company handles the intricacies on your behalf.
Our goal is to maximize your income while maintaining tenant satisfaction, creating a win-win situation for both parties.
We are your Real Estate Gladiators because our job is to protect you. When it’s time to raise the rent, we’re protecting you from:
- Rental increases that are too small. We won’t let you leave money on the table.
- Rental increases that are too high. We don’t want those expensive vacancies and turnovers any more than you are.
- Residents who might become confrontational. We are proud of the professional and positive relationships that we establish with residents. There’s less of a chance that we’ll have to deal with conflict and pushback from tenants during a lease renewal. If it happens, however, we’re prepared. This is our challenge to manage, not yours.
- Misinformation. We’re your buffer, shielding you from the noise and the nonsense around the screaming matches over rent control and the claims of landlords, tenants, and all of the other interested parties who have something to say about rising rents. Count on us to deliver relevant, informative data and expertise. It helps to have someone you can trust delivering the information you need.
We have helped many landlords and real estate investors move through the process of renewing lease agreements and increasing rents. We stand ready to help.
Please contact us at Real Estate Gladiators. We serve Monroe, Issaquah, Bellevue, Everett, Lake Stevens, Kirkland, and other cities in and around King and Snohomish counties in Washington State.
