How to Calculate a Rental Increase

How to Calculate a Rental Increase

Are your property ownership costs on the rise? As a Texas landlord, you likely already know that there are basically no rent increase laws in Texas.

While this gives landlords in Dallas and Fort Worth plenty of freedom, it can also leave them without much guidance on how to calculate a rent increase.

The good news is that experienced rental property managers like PMI can help. Today, we're offering some tips to raise the rent without risking a high vacancy rate.

Read on to learn how to calculate a rent increase that serves you without out-pricing your tenants.

Consider Your Rising Expenses

Rent increases aren't done superfluously. They reflect the rising expenses that the property owner incurs over time. These can include:

  • increasing maintenance costs
  • business expansions
  • property improvements
  • fluctuations in the market

Note that while Texas does not have rent control laws, you can only increase the rent at the start of a new lease. In other words, you can't raise the cost of rent when a tenant is in the middle of the lease. It's important, therefore, to take into account any projected increases in expenses in the coming month or year, depending on the length of your lease.

Do Market Research

Because there are no rent control laws in Texas, your tenants can't contest your rent increase on a legal basis. However, they can choose to look elsewhere for a place to live. To avoid losing tenants when you increase rent, make sure you aren't going above current market prices and losing your competitive edge.

Don't just look at the average cost of rent in Dallas or Fort Worth. A closer examination of your market will reveal that there's a significant difference in rent from one neighborhood to the next. For example, if your property is located in Eagle Ford, don't raise your rent to reflect the average cost of rent in University Park, where costs are much higher.

How to Calculate a Rent Increase by a Percentage

Oftentimes, the best way to keep up with rising expenses and reasonably increase the rent is to calculate your rent increase by a percentage. Typically, it's not advisable to increase the rent by more than 10% a year, unless you've made major improvements and want to appeal to a new market of tenants.

For example, let's say that your current rent is $1500 per month and you want to do a 4% increase. 4% of $1500 is $60, so your rent would increase to $1560 to reflect a 4% increase.

Need Help with Dallas and Fort Worth Property Management?

Learning how to calculate a rent increase is one of the many responsibilities property owners face. If you're ready to turn your investment property into a source of passive income, it's time to think about property management.

PMI Premier is proud to serve the property owners of Dallas and Fort Worth. Contact us to learn more about how we can help.