How Much Can a Northern Utah Landlord Raise Rent?
Hi, this is Tanya with Envy Property Management. With the recent significant rise in rent prices, we commonly get asked how much can a northern Utah landlord actually raise rent on a current tenant. It’s common for a landlord to raise rent when a tenant’s lease expires, and although the tenants may not agree, there’s absolutely nothing wrong with this approach. As a matter of fact, it’s typically necessary. Some things people generally don’t think about is, a landlord’s expenses increase from year to year as well! In fact, if a landlord doesn’t raise rent to offset the rise in expenses, that landlord has taken a cut in pay. That’s not an effective method to keep your investment property cash flowing. Businesses can’t stay in business by doing that and neither can landlords.
There’s typically a valid reason for a yearly rent increase, but there are still a lot of questions surrounding raising rent. Like why do landlords raise rent? How much can a landlord raise rent? Is there a limit on how much a northern Utah landlord can raise rent? What does a typical rent increase look like? Are there laws regarding how much a northern Utah landlord can increase rent? How much notice does a landlord need to give tenants when raising rent? And what is the downside to raising rent? Today I’m going to answer all of these questions and more so you can ensure you’re keeping your investment up to market rent standards without shooting yourself in the foot in the process.
#1: Why Do Landlords Raise Rent?
Despite what many people and tenants might think, landlords don’t just pocket all the monthly rent money they receive. Landlords have many expenses, many of which go up every single year. This is the main reason landlords raise rent: to keep up with increasing expenses.
Some of the expenses a typical residential landlord might have are:
- PROPERTY MAINTENANCE: Things like lawn maintenance, HVAC maintenance, gutter cleaning, and normal wear and tear maintenance.Property repairs: This includes fixing anything that breaks. And with a home, things break.
- PROPERTY TAXES: Landlords pay yearly property taxes to their local government, county, and state. These commonly increase every single year.
- LANDLORD INSURANCE: This is similar to homeowners insurance except it covers homes that are being rented out. It covers the property as well as the landlord’s personal property if kept there (it does not, however, cover the tenant’s personal property). It also has a liability portion in case a tenant is injured from the fault of the landlord not maintaining the property.
- HOA FEES: If the landlord’s property is located in a homeowners association, they will have monthly HOA fees to pay. These fees are always subject to increase at any time.
Another very important and valid reason landlords might raise rent is to keep up with market rents. If the area their property is located in has experienced significant growth, and rents are rising all around, savvy landlords will raise rents to keep up with the market increase. It’s never a good idea to have the least expensive rental unit in the area.
#2: What Does a Typical Rent Increase Look Like?
A typical rent increase is generally between 2% and 5%. For example: if rent is $1,500 a month, an average rent increase would be somewhere between $30 and $75 a month
When increasing rent, it’s more important for a landlord to raise rent a steady 2% to 5% per year than it is to not raise the rent for several years and then hit the tenant with a big 10% increase. A steady increase is a much easier pill for a tenant to swallow, than a hefty $200-$300 jump in one single year.
#3: Are There Laws Regarding How Much a Northern Utah Landlord Can Increase Rent?
In northern Utah, there are no laws on how much a landlord can raise the rent. They can raise rent as much as they like, as long as they don’t change the rent during the current lease term. But at lease-renewal time or with proper notice in the case of a month-to-month tenancy, the landlord can change the rent to whatever they like unless there’s a particular state or local law that limits this.
Some landlords may choose to not raise rent to market standards from fear that the tenant will leave. This isn’t typically a good practice, however, sometimes no matter how much hassle and expense is involved with moving, tenants will move due to a hike in monthly rent. If the tenant leaves, the landlord would then need to deal with tenant turnover costs and risk having a vacancy for longer than planned. The goal with rent increases is to get higher rent while not raising it so high that a tenant leaves.
#4: How Much Notice Does a Landlord Need to Give Tenants When Raising Rent?
It’s generally a good idea to give the tenants as much notice as possible when raising the rent. Depending on what type of lease your tenant is on will determine the amount of notice you must give in order to stay compliant.
For example: If the tenant is on a month-to-month lease, the landlord can raise rent at any time so long as they comply with the proper notice the state requires. Most states require a 30-day notice, however, it can vary from state to state.
If the tenant is on a standard 12-month lease agreement, a landlord can increase the rent at lease-renewal time. If a landlord wishes to renew a tenant’s lease, they will usually present the tenant with a new lease before the current lease ends. At Envy Property Management, we give our tenants a full 90-day notice when increasing rent.
#5: What is the Downside to Raising Rent?
The most common downside of a landlord raising rent is the tenant could leave. If a tenant leaves, the landlord would need to ready the unit for a new tenant, market and advertise the unit, and hope someone else will pay the increased rent. If the rent increase is fair and is in line with market rents, the landlord shouldn’t have a problem re-renting. But if the rent hike is excessive, that landlord will likely be looking at a continued vacancy and won’t be collecting any rent at all.
At the end of the day, rent increases are a standard practice when renting a property. When costs rise for landlords, landlords must pass this cost onto the tenant if that landlord wants to stay in business.
The best practice to increase rent in your investment property is to invest in rental market software. At Envy Property Management, we use several different rental market software platforms, all we do is input the property address and we receive a full analysis of what market rents are for similar rental properties in the same general area. This is another reason why it may be a good idea to hire a professional property management company to do the dirty work for you. If understanding what you should raise your rent price to seems a little too overwhelming and stressful and you want help choosing a Northern Utah property management company with years of experience, please contact us at Envy Property Management. We are a wealth of information when it comes to professional property management of your investment property. You can always ask us for some valuable tips and extra resources to make the choice simple and painless. Give us a call today, 801-337-4337 or visit our website at envypm.com where you can easily view our three-tiered pricing plan, so you can choose the package that best fits you and your needs.