With Denver metro area residential vacancy rates at a ten-year low, many Colorado landlords are dreaming of raising the rent. But many might wonder, when and how?
When you can raise the rent depends upon the type of tenancy you have. If there is a lease, the lease typically will not let you change the rent until after the term expires. In fact, some leases contain specific language as to when and how much you can increase the rent. So, assuming there are no specific provisions regarding this matter, you may want to talk about the rent 30 days before the lease ends.
It’s best to have an in-person conversation with your tenant followed by written notice. At the same time, your tenant can let you know if he or she wants to renew for another year. If you agree on the new rent, make sure to put the amount into a new lease or an attachment to your existing lease.
What if you don’t have a written lease and are on a month-to-month basis?
Technically speaking, you only need to give your tenant 10 days notice before the end of the rental period to terminate the tenancy (usually 10 days before the end of the month). So, the same time period would apply to increasing the rent. But it makes sense to start talking about rental matters well before this time, so that both you and your tenant can plan appropriately.
Perform a rent survey
Take some time to know exactly what’s happening in your zip code before having that talk. A little research will inform you how your property compares to market rates, making a powerful business case for a rent increase.
A rent survey is a simple tracking tool that allows you to keep up with trends in your neighborhood. It’s best to start creating yours three to four months before the tenancy ends.
Start by defining your property. Is it a single family home or condo? How many bedrooms and baths? Does it have a finished basement and/or two-car garage? Note amenities such as a yard, fireplace, extra family room or living room. Is it in good, fair or poor condition? Do you take Section 8?
When you know what you’ve got, research comparable properties. To find comparable houses, drive around the neighborhood, look at signs and scan Craigslist. To find comparable condos, look at www.forrent.com.
Notice when new properties are put up for rent and how quickly the signs or notices go away. If the signs don’t last very long, it means the properties are renting quickly at that price. Notice also when a property sticks around for a long time, it might not mean the price is totally wrong, but perhaps the property has a defect, like a weed-strewn front yard; on a busy street; or unfinished basement.
Over time, you’ll build a database of comparable properties and prices. Data in hand, you can more comfortably broach a rent increase.
For more information, see the Landlord & Tenant Guide to Colorado Leases and Evictions, 5th Edition, by Victor M. Grimm, Esq. and Denise E. Grimm.