How to Raise Rent: The Ultimate Technical Guide

Raising rent is one of the trickiest tasks you have to face as a landlord. It’s also a highly sensitive topic, especially during an economic downturn, where renters are struggling with rising living costs. But it’s one you have to contend with, as rent increases are necessary to run a profitable rental business.

In this in-depth guide, we’ll break down the key factors involved in raising your rent, including how to calculate a price that’s fair to you and your tenants. We’ll also show you which tenancy laws you need to follow, how to research your competition, and how to inform your tenant of your new rent.

Step-by-step guide for raising your rent

On the surface, raising your monthly rent may seem straightforward. But, in reality, there are rules you must observe based on your region’s residential tenancy laws. Following these laws not only helps you avoid legal trouble. And it helps you to maintain a positive relationship with your tenants.

Follow the step-by-step guide below to increase your rent the right way.

Step 1: Wait for the right time

Timing is everything when adjusting your rent, as you’re not free to hike your price as you wish. In most jurisdictions, residential tenancy laws permit landlords to raise rent only once per year or at the end of a fixed-term lease.  

Before contemplating your new rent price, find out the earliest time that you can legally increase it—and how much notice you need to provide to your tenant. Doing so will allow you to prepare accordingly, including completing the required paperwork to charge more. 

Step 2: Confirm the maximum allowable rent increase

Step 3: Research market rates and review your operating costs

The next step is figuring out how much to raise your rent. Start by comparing rent prices for properties that are similar to yours in your area. Do this by visiting a rental property listing website like Zillow, which lets you narrow your search by location, property size, number of bedrooms, amenities, and more. A tool like Rentometer is also handy for discovering rent prices in a given area. 

Next, review your operating costs to see how much they’ve risen over the past year, such as utilities, insurance, and property taxes. Knowing how much they’ve increased will help you determine how much to raise your rent to maintain your current profit margin. 

If needed, consider capital improvements you’ve done, such as a new roof, a kitchen renovation, and new appliances. You’ll need to account for these expenditures in your rent increase calculation to recoup your costs.

Step 4: Determine the optimal rent price

Once you’ve done your research and crunched the numbers, choose a suitable rent increase. Finding the proper balance is key: your new fee should allow you to maintain a healthy profit margin, align with market rates, and comply with rent control laws.  

Minimizing complaints from tenants when raising rent is also vital, as charging too much could aggravate them and prompt them to move out.

No tenant means no income, so always consider how your tenants will react to your new price before making your decision.

Step 5: Create a proper notice for your tenant

In most jurisdictions, you must inform your tenant of a rent increase in writing. Even if there’s no such requirement in your area, it’s still common courtesy to let them know that you’re raising the rent, as it gives them time to adjust their budget. 

In your rent increase letter, make sure to include all the necessary details as required by law. Usually this includes:

• The current and new rent amount
• The date the new rent fee takes effect
• Your signature and the date the notice was created

While not mandatory, consider adding details explaining (with evidence) why you’re asking the tenant to pay more. If you can justify your new rent fee, you’re less likely to get pushback.

Depending on your region’s rules, you may need to create a rent increase letter using an approved form, which you can download from your local or regional government’s website.

Step 6: Deliver the notice to your tenant

Once you’ve created your notice, deliver it to your tenant. You can do this by mail or email, but make sure to confirm they received the letter, as you’re legally obligated to inform your tenant of a rent increase in advance. The amount of notice you need to provide depends on the residential tenancy laws in your region.

Step 7: Address any concerns and questions from your tenant

Address any questions and concerns your tenant may have about your new rent fee. Be transparent about the reasoning behind the increase and receptive to their comments. In rare cases, negotiating the price or updating other terms in the lease may be worth it to keep a tenant happy.

Step 8: Document all the paperwork

Organize and file all paperwork related to the rent increase, including the rent increase letter sent to your tenant. It’s important to retain all relevant documents as proof in case of a legal dispute.

If the rent increase accompanies a lease renewal, make sure you have a copy of the new agreement signed by your tenant and yourself. The tenant needs to approve the lease before the rent increase can take effect.

Why should you raise your rent?

You don’t have to raise your rent if you don’t want to—charging the same amount this year as last is totally fine. However, bumping up your price is sometimes necessary for financial and strategic reasons. Here are the most common reasons that warrant a rent increase.

Higher operating costs

Expenses such as insurance, property taxes, maintenance, mortgage payments, and utilities are unavoidable costs of managing a rental property. While these are tax-deductible, your monthly rent still needs to be high enough to cover them so that you can earn a reasonable profit.

Some of these recurring expenses will increase over time, whether due to inflation, tariffs, price shocks, or other economic pressure. In that case, a higher rent fee will be necessary to cover them. Otherwise, your profit margin will shrink over time.

Rising rental rates

If local rent prices in your area are surging, it’s wise to follow suit and raise yours as well. Yes, you could leave your price as is rather than adjusting it to match the competition to gain an edge in attracting tenants. But it’s not the best long-term strategy.

By undercharging, you risk losing money in the long run, especially if rental rates drop in your area or you need to invest heavily in property improvements. Without adequate cash in the bank, you’ll have fewer resources to invest and grow your rental business.

A lower-than-average rent price may also attract financially unstable tenants relative to others in your neighborhood. It can also reduce your property’s resale value, as the new owner will have to drastically increase the rent to reflect a more realistic price, which will drive away renters who previously found the property appealing.

Rental property upgrades

Remodelling the bathroom, replacing the roof, or renovating a basement comes with a hefty price tag. As a landlord, it’s vital to earn a decent return on your investment in these large-scale projects, so you must incorporate them into your rent fee, which means charging more.

In addition, property improvements can boost your rental’s value, which you can reflect in a higher rental fee to attract higher-income tenants.

How do you calculate your new rent price?

Pouring over rental market rates and scrutinizing operating costs is one thing. But how do you actually use this information to calculate your rent increase? The steps below show you how to crunch the numbers.

Step 1: Figure out your current monthly expenses and profit margin.

List all of your monthly expenses, such as utilities, insurance, and mortgage payments. Then, determine how much you spent on average each month to pay for them during the past 12 months. (exclude any costs that are outliers, as your rental property reserve fund covers these). 

Finally, deduct the total monthly cost from your monthly rent fee—what’s left is your operating income, or the amount you earn after accounting for all expenses except for income taxes.

You can express your operating income as a percentage using this formula: Operating profit margin = operating rental income/rental income x 100

Example: You have a property that you rent out for $2,000 per month, and your monthly expenses are $1,300. So your current operating profit margin is 35% (($2,000 – $1,300)/$1300)) x 100).

Step 2: Determine your new monthly expenses

Next, estimate your rental’s expenses for the upcoming year. Some will remain the same, such as a mortgage term that you’ve locked in for five years. But others may increase, like your insurance, property taxes, HOA fees, utilities, and property management fees. 

You can estimate these costs by reviewing your bank statements to see how much your spending has increased. Property tax notices, insurance policy renewal statements, and similar documents can also help you gauge how much you can expect to pay.

Step 3: Calculate how much you need to raise your rent based on the drop in your profit margin.

Deduct your projected monthly expenses from your current monthly expenses. The difference is the amount you should raise your rent.

Continuing with our previous example, if you anticipate your total monthly expense increasing from $1,300 to $1,385, your new rent should be $2,085, an increase of $85. This amount is a perfectly justifiable rent hike based on a rise in your operating costs.

Step 4: Adjust the price based on local rental rates

This calculation is trickier, as there’s no exact formula to determine the optimal number. A good rule of thumb is to find five rental properties in your vicinity that are similar to yours. Then, compare these prices to what you intend to charge based on your day-to-day expenses.

What is the average price of these five properties? Is it higher than yours? If so, consider raising your price a bit more.

What are the rules for raising rent prices?

As a landlord, you must follow all local and regional laws when raising your rent. These laws are in place to ensure tenants are treated fairly and not subject to excessive price hikes and discrimination. 

Residential tenancy laws vary from region to region, so become familiar with the ones that apply in your area. Use the links below to learn how you can increase your rent, how often you can do it, the amount of notice you must provide to your tenants, and more.

Canada 

• Alberta Rent Increase Guidelines
• British Columbia Rent Increase Guidelines
• Manitoba Rent Increase Guidelines
• New Brunswick Rent Increase Guidelines
• Newfoundland and Labrador Rent Increase Guidelines
• Northwest Territories Rent Increase Guidelines
• Nova Scotia Rent Increase Guidelines
• Nunavut Rent Increase Guidelines
• Ontario Rent Increase Guidelines
• Prince Edward Island Rent Increase Guidelines
• Quebec Rent Increase Guidelines
• Saskatchewan Rent Increase Guidelines
• Yukon Rent Increase Guidelines

U.S.

• Arizona Rent Increase Guidelines
• California Rent Increase Guidelines
• Florida Rent Increase Guidelines
• Georgia Rent Increase Guidelines
• Illinois Rent Increase Guidelines
• Nevada Rent Increase Guidelines
• New Jersey Rent Increase Guidelines
• New York Rent Increase Guidelines
• Ohio Rent Increase Guidelines
• Texas Rent Increase Guidelines

How much can you increase your rent?

The amount you can raise your rent depends on the rent control laws in your region. Municipal regulations may also influence how much you can charge, as in California, where cities like San Francisco impose their own limits. 

Different rules may apply based on your property type, lease structure (fixed vs. month-to-month), and lease length. But, in general, rent increase limits usually range from 2% and 10%.

In Canada, rent caps are set at the state or provincial level and apply uniformly across the region. In the United States, most states lack rent control laws, with cities setting the limits on how much landlords can raise rent.

While some jurisdictions, such as Alberta, Saskatchewan, Texas, and Florida, don’t apply rent increase caps, most do. As a landlord, it’s your responsibility to know the maximum rent increase allowed to avoid overcharging your tenant. Tenants have the right to refuse to pay rent that exceeds the annual limit.

How often can you increase your rent?

In most areas, you’re limited to one rent increase every 12 months or once per fixed lease term (the latter usually spans one year). The 12-month waiting period also applies to month-to-month tenancies in most cases, but always confirm with local and regional laws for any exemptions or special treatment. 

How many days’ notice do you need to provide to your tenant?

As a landlord, you must give your tenants written advance notice before implementing a rent increase. This allows them to budget, move out, or dispute the new fee. Generally, the notice period required for tenants is between 30 and 90 days. The exact notice period depends on:

• The area your property is located
• The tenancy type (fixed vs month-to-month vs week-to-week)
• The size of the increase (a major increase may require more notice)
• The tenancy length 

Our final thoughts

If you’re thinking about raising your rent, devote time to researching local rental rates, reviewing your operating costs, and getting acquainted with laws in your area about how and when you can do so.

The worst thing you can do is increase your rent at the last minute, on impulse, without considering rent control rules or how your tenant might react to your new price. By understanding how and why you’re raising your rent, you can avoid getting entangled in legal disputes and heated arguments with tenants.

No matter what you decide to charge for rent, it pays to make it fast and easy to collect. Sign up with SingleKey Rent Collection today to automate your rent payments and get paid on time. Your tenants will also appreciate the convenience—and the help in boosting their credit score, as SingleKey reports rent payments to Equifax.