Will My Rental Rates Go Up Next Year
One of the most common dilemmas renters face is whether or not your rates will go up when your year-long lease is up. Sometimes you might just have to pay $10 more, but some places can charge upwards of $200 or more per month. Rest assured we would never hijack your rent like that, but we understand you might not live at 520 Park forever, and want you to be aware of this at other communities. Here's your guide to this common issue and what you can do to fight it.Why Do Rates Typically Rise Every Year? Aside from the obvious financial motive, raising the rent every year makes sense (even if the amount is trivial) simply to set expectations Property managers want tenants to simply assume that rents will go up every year so that tenants don't balk at rent hikes. Rents are also both a cause of and caused by inflation - they rise together, and while inflation may slow, it almost never reverses, says Brian Davis, director of education for SparkRental a company that educates owners about investment properties and a real estate investor with 15 rental properties. Davis also points out that rates will also rise depending on need. If the property manager has recently rented an apartment in your building for $1,000 and 50 people applied for it, it was priced too low. So the next time the lease is up for renewal, the property manager will hike up the rate. Kass Management Services Principal Mark Durakovic, whose company manages more than 5,000 apartments in Chicago, also points out that maintenance and taxes usually do cost more each year for the property management company - another reason for rising rents. What's a Fair or Average Increase? According to Durakovic, an increase of 2 to 4 percent is fair. If you're paying $700 a month, an increase of $14 to $28 would be common. If rental rates of the buildings around you are rising, you should expect yours to rise too. Negotiation Tips Some property managers will negotiate. Others won't. If yours will, be sure to look up what other apartments in your building are renting for so you can use that for leverage. If the property manager is asking for significantly more than what other apartments are listed for, you might be able to lower your rent. According to Davis, you'll have better luck negotiating with a private property manager as opposed to a larger corporation. Try to think about the situation from your property manager's point of view to win the negotiation. Property managers want more than just money; they're also searching for stability. A long-term tenant who pays on time and will be there for many years. They want minimal damage to the rental unit, and peace and quiet for the neighbors. They want security, the best assurance possible that the tenant won't cost them money, says Davis. He recommends the following to get a lower rate: -Offer to sign a long-term lease -Offer a higher security deposit -If your property manager lives in your building or nearby, consider offering free babysitting, dog walking or cleaning services to him or her. -Davis once offered to pay the rent early every month at his current rate. If he ever defaulted on this deal, the property manager could charge more. Ways to Tell If Your Rates Might Drastically Increase If you're worried about skyrocketing rental rates, compare what you're currently paying to what other similar apartments in the area rent for. If you're paying below market, you should expect an uptick in rent When Is a Rental Hike Justified? If your property manager has recently made upgrades to your apartment or the community, your rent will probably rise. Likewise, if your neighborhood is improving, you might pay more, says Durakovic. Above all, remember that a price increase has to do with demand for the apartment, not with your needs as a renter. Demand can rise based on changes that have nothing to do with the unit itself; maybe the local schools get better, or maybe the neighborhood suddenly becomes attractive to a group of people who have more money. Maybe more businesses are opening nearby and more jobs become available. Rent increases only need to be justified by one thing: other people willing to pay more to live in the unit, says Davis. The good news here is we may not raise your rent at all. We look at each resident on a case-by-case basis and determine your rent for the following year based on certain criteria and negotiation. So, basically, you should just live here forever.