I’ve been renting out my rooms for a fixed price. However, expenses such as cable, home owner’s association (HOA) fees, and electricity bill have all increased. To make up for these increased expenses, in 2008, I’ve raised my rent prices accordingly – this is the easy part. The hard part is telling your roommates that you’re raising the rent price after they’ve been accustomed to paying a set price.
The one and only time I had to raise my rent price was unsurprisingly met with some opposition. So, if you ever in a situation where you have to raise rent prices, I have some guidelines to follow when you have to raise rent prices. First off, if you’re the type of person that hates delivering unpleasant news with lines such as “hey guys, but I have to raise the rent price because expenses are going up,” then it’s probably best to wait when the timing is right.
Timing is Everything
The best time to raise the rent price is waiting until your roommate moves out so that when you advertise your room for rent, you can advertise your new higher rent price. Obviously, you can see why this will avoid any opposition or conflict because your new roommate will be unfamiliar with your past rent price, assuming it’s not a friend of a past roommate.
The problem with this is the uncertainty of knowing when your roommates are moving out. When I had to raise rent prices, I had two roommates. So the likelihood of them moving out at the same time was highly unlikely, thus this was not a viable option for me to follow.
Ultimately, I had to be point blank and tell them that I needed to raise the rent price to deal with the increased expenses. This, of course, was met with some opposition, but I’ve explained to them what expenses were going up.
The Talk on Raising the Rent Price
I explained to my roommates that the cable and homeowner’s fees have already increased and I’ve been eating the increased costs myself for the last several months. The electricity bill was the bill that made my decision to raise the rent price. Both the cable bill and homeowner’s fees increased by $8 and $6 respectively, but the electric bill was growing out of control like a weed. The following table compares expenses from the year I raised rent prices to the previous year.
|Expense||2007 per month cost||2008 per month cost|
I didn’t include the electric bill because it varies depending how much you use it, where as the cable and homeowners expenses were fixed costs. With the electricity, I didn’t notice any wasteful habits in my roommates that could be cause of the increased bill. The electric bill increased mainly from regular everyday activities such as cooking, laundry, powering house hold appliances, so I really had no option, but to increase the rent price.
How much did I raise the Rents by?
As a live-in landlord, I want to be fair as possible. When I raised the rent price I didn’t choose an arbitrary round number like $50 or $100 and say “the rent price is increasing by $50 a month.” Instead, I had to justify the increased price with the increased fees. I simply asked for an additional $30 a month from each person. Now, $30 doesn’t sound like a lot of money, but from the psychological sense, it’s more money for the same thing you were previous paying for. Trust me, no body likes paying more money for some they were use to paying less for and it’s going to be met with opposition. So, to explain the justification for the $30 increase, I said:
“Look, the electricity bill is always going over what I budgeted. So I need to raise the rent by $30 – it’s like an extra $1 a day. We all use electricity everyday when we use our laptops, watch TV, cook, or do laundry so an extra $1 to cover the increased electricity rate would help offset the increased electric bill. I’m not looking to gouge you guys or rip you guys off, I just want to be fair and I think asking an extra $1 would help, but not break your budget.”
That’s pretty more or less along the lines of what I said to my roommates. I can see in their faces, that they were not happy. Initially, they didn’t say anything, but over the next few days, they voiced their opinion. Ultimately, when the first of the next month rolled around they paid the increased rent price because an extra $30 wasn’t going to break their budget and the increases were justified.
- Raise rent prices when you’re transitioning between roommates because you’re new roommates will be unaffected by the newly increased price if they didn’t know what the previous rent price was. If you only have one roommate, hold off and raise the rent price when you’re looking for a new roommate. I can say from first hand experience that it will definitely go over smoother.
- If you have to raise rent prices on your current roommates, raise it within reason. Don’t pick an arbitrary amount and say “here, the rent is going up by $50 bucks,” Instead figure out how much your expenses have gone up and raise it accordingly. So when your roommate asks why rent price has to go up, you have numbers to back it up. After all, we are all used to seeing price increases, but having some justification behind the numbers makes the pill easier to swallow.
Since raising the rent price in 2008, I have not since raised my rent price. I’ve think I found a nice sweet spot to what I have to offer as a room to my asking price. Anything beyond that, I’ll price myself out of the market and will have a few empty rooms trying to fill.