Rent Increase Letter to Tenant: Free Template and Tips

Inflation has been on the rise for the past few years, driving prices up by over 18.7%. Meanwhile, the Department of Housing and Urban Development (HUD) has increased its assessment of fair market rents by 12.2% nationally for fiscal year 2024. As a property owner, you can't just maintain rents at the same level for years on end without suffering financial losses. While it may not be your favorite task, raising rent is often a necessary part of property management.

Once you've made the decision to increase rent, the next step is communicating this change to your tenants. This is where a rent increase letter comes into play. In this article, we'll walk you through creating this notice. You'll learn what elements to include, how to deliver the notice, and which strategies will increase your chances of tenant retention despite the price increase.

To help you get started, we've included a sample rent increase letter template that you can customize to fit your needs. We'll also share tips on leveraging property management software to streamline the entire process.

Explaining a rent increase letter

Landlords or property managers can't keep the monthly rental payment at the same amount indefinitely. If your property has high turnover, adjusting the rent with each new lease agreement is simple. However, how do you handle a rent increase when you have a long-term tenant?

In these situations, you'll need to write a rent increase letter. This document serves two purposes: it notifies the tenant of the upcoming change, and it provides a written record of the notice.

Reasons for rent increases

Raising the rent is not always easy when you have stable and reliable tenants. A landlord or property manager might hesitate, not wanting good tenants to leave — and therefore face the hassle of finding new ones. However, real estate investing is a business, and sometimes tough decisions are necessary to maintain profit. Here are some of the reasons why you might need to raise the rent:

Increased expenses

As the overall cost of goods and services in the economy rises, landlords may increase rent to maintain the real value of their rental income. These increases affect operational costs like the following:

• Utilities
• Insurance
• Property maintenance
• Property taxes

Property improvements

When a property owner renovates units, refreshes appliances, or adds new amenities, they raise the rent to reflect the enhanced value of the living space. Many investors use renovation strategies to add value to a property and increase rent.

Market dynamics

There might be changes in your local market that require rent increases. This could include things like the following:

• Increased demand: Job growth, improved infrastructure, or cultural developments can make an area more desirable, allowing for higher rents. If there's a limited housing supply, competition among renters in high-demand areas can drive up prices.
• New regulations: Laws requiring property improvements, additional insurance, or higher fees can increase landlords' costs.

Considerations for rent increases

If you've identified that you need to raise rent, there are a few variables to consider before you create a lease increase notice:

Laws and regulations

Be aware of your state's rules on rates and allowable increases. Some states have rent control laws you'll need to follow. For instance, in Oregon, or certain California cities, you can't simply set a new monthly rent without checking the maximum allowed increase rate.

Market rates

Just like when you initially set rental rates, you'll want to research the local rental market and fair market rent. Knowing what your competitors charge, and the current market value, helps you set a new monthly rental payment that's neither too high nor too low.

Security deposit

Most landlords base security deposits on the rental amount. In this case, you'll need to increase the security deposit to align with the new annual rent increase.

Why send a rent increase letter

For landlords looking at raising rent, here's why you should send a rent increase letter:

• Formal notice: A rent increase letter serves as an official, written notification to tenants about the change in their rent. This formal communication clarifies and prevents misunderstandings about the new monthly rent.
• Legal requirements: Many jurisdictions have specific laws regarding rent increases, including how much notice you must give. Sending a formal letter helps landlords comply with these legal requirements and protects them from potential disputes or legal issues.
• Tenant relationship: Rent increase letters can help maintain a positive relationship with tenants. It provides an opportunity to explain the reasons for the increase, showing transparency and respect for the tenant's right to understand changes affecting their housing.
• Time to prepare: Sending a rent increase letter in advance gives tenants time to adjust their budgets or make alternative arrangements if necessary. This consideration can help reduce tenant turnover and ensure that the sudden financial changes don't catch tenants off guard.

When to send a rent increase notice

The timing of this written notice depends on the lease agreement and tenancy. The different notice periods by type are as follows:

• Month-to-month tenancy: You should send the notice of rent increase 30 days before the effective date of the increase.
• Fixed-term lease: Landlords can raise monthly rent at the end of the current term. Some lease agreements include clauses about increases.
• Other factors: State and local laws may dictate details around rent increases, like the maximum increase amount.

What should be in a rent increase letter?

You want your rent increase letter to be friendly and clear. When you write the notice, include these key elements:

• Date of the letter: Provides an official timestamp for the notification.
• Tenant's name and address: Confirms the intended recipient and rental unit.
• Current rent amount: States the current amount paid by the tenant.
• New rent amount: Specifies the updated rental fee.
• Effective date: Indicates when the new rate begins.
• Reason for the increase (if any): Explain the reasons behind the change to promote transparency.
• Notice period: Complies with lease terms and local regulations, informing tenants of their rights.
• Changes to other terms (if applicable): Covers other changes beyond the rent increase.
• Contact information: Offers a way for tenants to ask questions or voice concerns.
• Signature: Authenticates the document as a legitimate notice.
• Decision deadline: This sets a timeframe for the tenant to decide on renewal or moving out, if applicable to the lease.

Rent increase letter template

You can use our sample rent increase letter template to get started:

[Your Name or Property Management Company]

[Your Address]

[City, State, ZIP Code]

[Email Address]

[Phone Number]

[Date]

[Tenant’s Name]

[Tenant’s Address]

[City, State, ZIP Code]

Dear [Tenant’s Name],

We appreciate having you as a tenant at [Rental Property Address] and want to ensure you're satisfied with your living arrangements.

Due to rising property maintenance costs and market conditions, we need to implement a rent increase effective [Date of Increase].

Current rent amount: $[Current Rent Amount] per month

New rent amount: $[New Rent Amount] per month

Effective date: [Date the New Rent Starts]

Your [Month] rent payment will reflect this new amount. All other terms of your lease agreement remain unchanged.

We understand that rent increases can be challenging. We strive to keep our rates competitive while maintaining the property's standards.

Please let us know your decision by [Decision Date]:

1. If you choose to renew your lease at the new rent amount, we'll send you a new lease agreement for your signature.
2. If you decide not to renew, you'll need to vacate the property by [Current Lease End Date].

We appreciate your prompt response. If we don't hear from you by [Decision Date], we'll assume you do not wish to renew your lease.

If you have any questions about this change, please contact us.

Thank you for your understanding. We value your tenancy and hope for your continued residency.

Sincerely,

[Your Name]

[Your Title]

[Property Management Company, if applicable]

Delivering a rent increase letter

Once you've created your rent increase letter, you have several options for delivery and confirming that the tenant received it:

• Personal delivery: Hand the rent increase letter directly to the tenant.
• Certified mail: Send the letter via certified mail with a requested return receipt.
• Email: If your local laws allow, you can email the tenant regarding the rent increase.
• Door posting: In some jurisdictions, you can post the increase letter on the door of the rental property.

Tips for rent increases

To reduce the risk of tenant turnover, consider these approaches from the r/realestateinvesting subreddit: 

• Provide market comparisons: "Add some comps to show that you are being fair. Tenants are less likely to leave if you show them that their rent is still going to be lower than everywhere else." —u/cococamz
• Open communication: "A phone call or face to face visit to a long term tenant to discuss the situation would probably be more effective. I recently went through this with some of my rentals. I posed the situation there have been cost increases and I need to raise the rent, what amount do you think would be fair?" —u/daytradingguy
• Gradual increases: "You need to raise rent every time they sign the lease 50 or 100 is easier to swallow then 300" —u/Lopsided_Water_2243

Managing tenant's rent

Landlords can streamline the process of determining rent increases, communicating changes, and managing ongoing compliance by using property management software. Azibo's integrated platform can help you with the following:

Online rent collection

Make it easy and secure for tenants to pay rent online. Azibo's rent collection functionality allows tenants to adjust to new rent amounts post-increase. It also enables automated reminders and real-time tracking of payment statuses, helping minimize late payments and improve landlord-tenant relations.

Document storage

Azibo provides secure storage for tenancy documents such as lease agreements and rent increase notices. Having everything in one place makes it easy to find information quickly when you need it.

Financial organization

Track all of your income and expenses with Azibo's built-in accounting solutions. This helps you to see your property's finances and make decisions about when to raise rent.

Choosing new tenants

If your tenant decides not to renew their lease and you need to find new occupants for your property, Azibo simplifies this process with the following:

• Online applications: Quickly gather key information from prospective tenants through digital forms.
• Tenant screening: Use Azibo's tools to evaluate applicants and select the best tenants for your property.
• Lease agreements: Create state-specific, legally compliant agreements for your chosen tenants.

Letter to increase rent to tenant

Raising rent is a common aspect of property management. Your rent increase letter helps you communicate changes clearly and professionally to your tenants. Consider local laws, market rates, and your tenants' perspectives when planning increases.

The template and tips in this article give you a solid starting point for creating your rent increase letter. By following these guidelines, you can maintain a positive landlord-tenant relationship while keeping your property profitable.

Rent increase letter to tenant: FAQs

How much can a landlord legally raise rent in Texas?

There are no statewide rent control laws in Texas, so landlords can raise rent as much as they want unless limited by lease terms or local regulations.

How many days' notice to increase rent in Florida?

Florida law doesn't mandate a specific notice period for rent increases. The lease agreement or local ordinances generally govern the timeline for increase notices.

Is there a 60-day rent increase notice in Washington state?

Yes, landlords in Washington state must give 60 days' notice for rent increases.