The Downside To Raising Rents

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The Los Angeles rents are likely to rise an additional 2.9% in 2018, what this means to you as a landlord is higher rental income of course, but it could also mean additional vacancies or evictions as the rental rates are pushing the renters beyond appropriate rent to income ratios. Many of the renters are choosing to relocate to an area that has better rent for them but that sometimes means driving further which as we all know in L.A. can add a good amount of additional drive time, others may try to scrape the money together every month so they don’t have to move but that’s usually a short term prospect.

As a landlord you will want to consider your current residents and face the facts that if they move the cost to replace them can be significant, down time for the unit (lost revenue), the expense to turn the unit and of course advertising and in some cases you will have to pay commissions to a realtor or property management company. It can sometimes behoove a landlord to meet the resident halfway on the increase, maybe setup a plan to gradually increase their rent instead of all at once or maybe consider not doing the full percentage increase but something that is comfortable for you both (keep in mind the higher rent will exponentially increase the value of your asset) and will allow them to stay in their unit.

If a resident tries to make ends meet but can’t and you need to evict it can be a costly process, lost revenue, courts costs and depending on your judge you could end up being surprised with other fees such as a cash for keys situation or they decide to take it to a jury trial.

Raising rent is a necessary process as you purchased your property for an investment, but you also need to consider all options and decide on the best course of action for your investment before making any decisions as it affect you and your residents.

Written by

Entrepreneur-Investor-Founder. Posting tips and insights from my experiences in real estate, investing & entrepreneurship- https://www.joekillinger.co/

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