In the country, nearly half of the population rent homes instead of buying them. With that in mind, rent increases after a year are a real possibility.
Most landlords tend to increase rents after a year due to a myriad of reasons. As a tenant, it is essential that you prepare for such hikes in rent.
Moreover, you should also be aware of what to do in such situations and how to avoid them. Keep reading this guide to learn more.
Apartment Rent Increasing
When a rent lease expires at the end of the year, the overall rent amount also tends to increase. The average rent increase each year is estimated to be 3.18%.
This is when you should decide whether to renew your lease or find a new apartment.
Apartment rent increases for a variety of reasons, including market changes. Other causes include rising demands for rental properties.
However, after renting an apartment for a year, tenants might be wondering what has changed.
The apartment and related amenities are the same for them, so why the rent increase?
Unfortunately, there are actually multiple factors that affect the overall rent amount. Not to mention several changes in the real estate market.
This article will take a deeper dive into this and explain to you the several reasons behind rent increases.
Understand Apartment Rent Increases
Most landlords can legally increase rent each year for a variety of reasons. While they can increase the rent once the lease is over, they cannot do it during mid-lease.
In other words, a landlord cannot increase your rent during the duration of your contract. They can do it only when this contract is expiring.
However, they can raise your rent mid-contract in a few cases. This is mainly when it has been specified in your contract that rent changes can be allowed.
Much like other industries, even the rental one has to respond to the overall economic conditions.
This is why the rent may increase.
There are also other reasons why apartment rent is raised. They include the following:
Real Estate Market Changes
The primary reason why rental price increases each year is due to the real estate market changes. This is why when demand rises, so does the overall rent.
Economic changes, such as interest rates, may occur in the real estate industry. However, another factor that governs these market changes is the location.
As the annual inflation increases, so does the overall rent cost. This also depends on the location of the apartment.
The landlords need to analyze whether the tenant can afford the apartment during high inflation. This is why they increase the rent.
Modifications and Improvements in the Neighborhood
This is also another significant reason that impacts rising rent costs.
The more attractive the neighborhood becomes, the higher the cost of apartment rents in that location.
A neighborhood can become more desirable through the availability of numerous facilities that make living there convenient.
This includes supermarkets, schools, public transportation, libraries, and more.
Value of the Apartment
If the landlord adds more improvements and upgrades to the apartment, its value will be increased.
Any additional features that enhance the property and living there could contribute to higher rent costs.
Such features include painting or landscaping, renovating the kitchen or bathroom, and installing HVAC.
These enhancements can lead to raised rent.
More Job Opportunities
If a large company opens in a location, it raises the property value of the apartment. As a result, the rental cost increases.
This is because more job opportunities are created, and people will start moving to this location. Hence, the demand also increases.
Property Maintenance and Other Related Costs
Landlords tend to spend a considerable amount of money maintaining the property and surrounding area.
This ultimately gets reflected in the rising rental cost.
They need to pay for unforeseen repairs, maintenance costs, property tax, and more. Property owners need to find a way to pay for these upgrades.
Thus they all compound into the increased rental cost.
A Rise in Property Taxes
Another reason why apartment rent goes up is the rise in property taxes. Property taxes vary and fluctuate according to local law.
When the property taxes increase, it’s the landlord who has to pay them. And when the landlord’s cost increases, they recover it through the rent.
So, if the property taxes in your state are increasing, be prepared to have your rent raised by the end of the lease term.
Booming Local Economy
As the local economy booms and job prospects increase, the property value also increases.
Hence, if the economy improves, landlords may increase the rent cost to reflect the property value.
Even in slow and steady economies, property value steadily increases. It only makes sense for the rent to grow in a growing economy.
To Earn More Profit
The truth is that landlords are also renting apartments as a business. This is why they may raise the rent; to increase their profit.
The landlords can increase their rent legally as per their wishes, so you cannot stop them.
Responding to Rental Changes
Now that you know about the reasons why overall rent can increase let’s discuss what you can do.
It is essential to understand what you, as a tenant, can do about rental increases.
There are multiple actions you can take besides moving to a new apartment. Moving is a big step, which is why other options are worth exploring.
Here are some of the ways you can respond to a rental hike:
Ask For Time to Think about It
You don’t need to decide today whether to renew your lease or move out. Take some time to figure out your finances and then make a suitable decision.
Figure out your budget and whether or not you can afford the new rent. Then decide if it’s worth staying or exploring other options.
Know Your Rights
There are specific rules that landlords need to follow.
For example, they cannot increase rent costs in the middle of the contract. They can only do it once the tenure has ended.
If they increase before the rental tenure ends, you can challenge your landlords. In some cases, you can even give them a legal notice.
Learn to Reasonably Negotiate
Put your negotiating skills to use by coming up with a solution that fits both you and the landlord. Perhaps you can ask them to create a longer-term lease.
You can’t ask them not to increase the rent, but you can certainly ask them to reduce the increase rate.
Having an honest conversation with the landlord about your financial limitations can really make a difference, provided that your landlord is an empathetic individual.
The two of you can reach an agreement that suits both of you. For example, you can ask your landlord to raise 5% rent instead of 10% for the current year and agree to a 10% increase for the next year.
You can also make a new contract with them that is beneficial to both you and the landlord.
Opt For Long Fixed-Term Lease
By law, your landlord can’t increase the rent of the apartment during the lease period.
Most rental contracts are 12 months long, and the apartment rent is revised every 12 months.
You can sign a longer fixed-term lease, for example, 2 or 3 years long.
This means that your landlord won’t be able to raise the apartment rent for this duration, and you can continue paying the rent you pay now.
Prove Your Worth
If you have skills, put them to good use at the apartment to prove your worth. For example, you can do some electrical work or landscaping.
This will reduce the landlord’s operational and maintenance costs as well. This way, they might not increase the rental cost.
Be a Great Tenant
Landlords fear that they might end up with tenants who damage their property. Just like finding a good landlord is a blessing, finding good tenants isn’t any different.
If you prove yourself a great tenant who takes care of the apartment like their own, pays the rent on time, and is on great terms with the landlord, you’re in for good news.
The chances that your landlord won’t increase the rent as frequently are high because they wouldn’t want to lose a great tenant!
Sometimes, the most suitable option is to move out simply. This can reduce your costs, especially if you cannot afford the new rent.
Be sure to communicate your moving-out plans to the landlord. This might persuade them to revise the rental agreement in your favor.
How to Prevent Future Rent Increases
You can follow some strategies to avoid future rent increases of this sort. They include the following:
Ask to Sign a Longer Term Lease
Before signing a lease on the apartment, you can actually ask for a longer-term lease. This way, the landlord cannot increase the rental cost each year.
For example, if you sign a two-year lease, you will have more security. This is also an attractive option for landlords since they know you are here for a longer time.
Keep Your Apartment Pet-Free
Renting with pets often meets more terms, higher deposit, and sometimes, greater rent. The landlords sometimes have to cover costs on damages made by pets.
Don’t get a pet if you cannot afford to pay a higher rent.
They will likely increase the overall rent and lead to more fees and costs charged by the landlord.
Avoid Asking for Upgrades
You may be tempted to ask your landlord for upgrades, but these can ultimately amount to a higher rental cost.
Even if your landlord offers one, don’t take it unless specified that it’s for free.
If there is a minor repair or maintenance that needs to be done, do it yourself.
If you move often, it will definitely lead to higher costs. Not only are moving expenses high but moving requires payment upfront.
Sometimes paying that higher rental amount is cheaper than moving and finding a new apartment.
The most suitable option, in this case, would be to change your budget to suit the rental increase.
Pay Your Rent on Time
If you are an excellent tenant, the landlord might not increase your rent. This can be done by paying your rent on time and never being late.
If you can pay a bit early, that would be even better. The landlord would not want to lose an excellent tenant like you.
Doing this can have other benefits as well, such as it can improve your credit score as well.
Landlords often raise the rent each year because they legally can. However, there are plenty of ways to respond to this rental hike.
Before signing a lease on a new apartment, you can also ask for a longer-term one instead. This can help you avoid facing a higher rent later on.
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