What Is Rent Increase?

Raising rent is one of the most uncomfortable parts of being a landlord. Nobody likes telling a good tenant they need to pay more. But if you are not increasing rent regularly, you are effectively giving yourself a pay cut every year as your costs go up.

Property taxes increase. Insurance premiums climb. Maintenance costs go up. If your rent stays flat while everything else rises, your net operating income shrinks and your investment performs worse every year.

When to Raise Rent

The natural time for a rent increase is at lease renewal. When the current lease term ends and you offer a new lease, you include the new rent amount.

For month-to-month tenants, you can raise rent with proper notice (usually 30-60 days depending on your state). You do not need to wait for a lease to expire because there is no fixed-term lease.

Do not try to raise rent in the middle of an active lease. The lease is a contract. Both sides agreed to a specific rent amount for a specific period. The only exception is if your lease includes an escalation clause (some commercial leases tie rent to CPI, but this is uncommon in residential).

How Much to Raise Rent

The market decides how much you can charge. Your job is to figure out what the market rate is and get as close to it as possible without losing good tenants.

Research comparable units. Look at what similar apartments in your area are renting for right now. Check Zillow, Apartments.com, and Craigslist. If your 2-bedroom is renting for $1,400 and comparable units are listed at $1,550, you have room to increase.

Factor in your costs. If your property taxes went up $600 this year and insurance went up $300, that is $75 per month in new costs across the year. At minimum, your rent increase should cover rising expenses.

Consider the tenant. A good long-term tenant who pays on time and takes care of the unit is worth $50-100 per month in avoided turnover costs. You might increase from $1,400 to $1,475 instead of $1,550, knowing that tenant turnover would cost you $3,000-5,000.

A general rule: 3-5% annually keeps pace with inflation and rising costs. On $1,500 rent, that is $45-75 per month. Most tenants accept this without pushback because they know costs go up everywhere.

Notice Requirements

You must give written notice before increasing rent. How much notice depends on your state:

• California: 30 days for increases under 10%, 90 days for 10% or more
• New York: 30-90 days depending on lease length and increase amount
• Texas: No statutory requirement for fixed-term leases (applied at renewal). Month-to-month requires notice equal to the rental period.
• Florida: 30 days for month-to-month tenancies
• Colorado: 60 days for increases of 3% or more

Always give notice in writing. Email is fine in most states, but a physical letter (or both) creates a paper trail. Keep a copy. Include the new rent amount, the effective date, and reference the lease clause that allows the increase.

Real Example: Annual Rent Increase Strategy

I have 12 units with an average rent of $1,300. Each year I raise rent by 3-5% at renewal. Here is what that looks like over 3 years:

Year 1: $1,300 average rent. Total annual income: $187,200 across all units.
Year 2: 4% increase to $1,352. Total annual income: $194,688. That is $7,488 more per year.
Year 3: 4% increase to $1,406. Total annual income: $202,464. That is $15,264 more than Year 1.

If I had kept rent flat at $1,300, I would have missed out on $15,264 in annual income by Year 3. Over 5 years, the gap grows to over $40,000. That is money that covers your rising costs and improves your cash-on-cash return.

Rent Increases in Rent-Controlled Areas

If your property is in a rent-controlled area, you have legal caps on how much you can raise rent. These vary widely:

• Some cities cap increases at CPI (Consumer Price Index), typically 2-4% per year
• Others set a fixed percentage cap, like 5% or 7%
• California's statewide cap (AB 1482) limits increases to 5% plus local CPI, or 10%, whichever is lower

Rent control does not mean you cannot raise rent. It means you need to know your local rules and work within them. Failing to comply can result in penalties and forced rent rollbacks.

Common Mistakes With Rent Increases

Not raising rent at all. This is the biggest mistake. Keeping rent flat for 3-5 years while costs rise is effectively losing money. Even a small annual increase of 2-3% keeps you aligned with the market.

Raising too much at once. If you have not increased rent in 3 years and try to jump from $1,200 to $1,500 in one shot, you will lose the tenant. Small, annual increases are easier for tenants to absorb and less likely to trigger a move-out.

Not providing proper notice. Failure to give the required written notice makes your rent increase unenforceable. The tenant can legally continue paying the old amount until you provide proper notice and the required waiting period passes.

Ignoring the market. Raising rent 5% when comparable units in your area have not changed or have dropped in price will cost you tenants. Always benchmark against the local market before setting your new rent.

Frequently Asked Questions

How much can I raise rent each year?

In most states, there is no limit for market-rate units. In rent-controlled areas, increases are typically capped at 3-10% per year. A common annual increase is 3-5% to keep pace with inflation and rising operating expenses.

How much notice do I need to give for a rent increase?

Most states require 30-60 days written notice. Some require more for larger increases. Always provide written notice and keep a copy for your records.

Can I raise rent in the middle of a lease?

Generally no. Rent can only be increased when the lease expires, at renewal, or during a month-to-month tenancy with proper notice. The lease is a binding contract for the agreed-upon rent amount.