LANDLORD’S CHECKLIST FOR ANNUAL RENT INCREASES IN A RENTAL PROPERTY IN ONTARIO, CANADA
Why You Should Increase Rents Every Year
This guide includes:
- 3-page PDF document
- 9-step checklist to increase rents in your rental unit
- Sample email to notify your tenant about the rent increase
- Great guide for those who haven't increased rents in their rental yet!
I know annual rent increases may seem a logical and easy thing to do for most aspiring landlords. For me, it was the hardest task ever!
I kept having an endless dialogue with myself about the pain that a rent increase would cause my tenants. I also thought that keeping rents low would help me keep good tenants because they'd feel great about having a house at a below market price. So I couldn't make myself increase rents for a while.
At one time, after I’ve been a landlord for over two years, I finally realized that, if I want to stay in the business, I must increase rents. This realization came to me when I was looking for a new rental property to buy.
I noticed that in many cases when a good deal comes along, I buy a house for cheap from a landlord who didn't make it because he never increased rents.
It suddenly became obvious to me that if rents haven't been increased for years, expenses still went up no matter what. The last time (and the only time) prices went down in Canada was in 1952 – the year with negative inflation!
So the unfortunate landlord, who never increases rents, ends up with a property that causes serious continuous financial loses because expenses keep going up while profits remain low. Like many of us, he doesn't have deep enough pockets to re-adjust, so he is forced to sell the property for cheap.
Why do bad tenants stay and great tenants leave?
Tenants are people. Life changes often and great tenants will likely leave at some point because of a life event: marriage, graduation, job change, new hobby, moving out of town, found a better place, etc., etc., etc. You can't keep great tenants forever! But guess what?
If you never raise rents, your bad tenants will always stay and all good tenants leave. The simple reason is that the rent will become so unbelievably low relatively to everywhere else, that your bad tenants will never be able to find a new place to move to. No matter how you try to incentivize them, they will hang on forever.
Give Yourself a Raise!
If you increase rent by $20 / month, your annual profit increases by $240. Seems insignificant?
In a market with 6% cap rate, this increase typically results in the value of your rental property going up by $4,000. This is because the more money your rental property brings, the more money you can sell it for.
Now, let’s say, you work at a 9-5 job and make 100K / year, then it takes you approximately 2 weeks to make $4,000.
Why wouldn’t you give yourself a $4,000 raise? You definitely should!