As a landlord with a rental property in San Francisco, you’re probably looking for ways to increase the return on your investment. One way to do this is to increase your tenant’s rent. However, in San Francisco, there are certain laws and regulations in place.
Before you go ahead and increase the rent of your San Francisco rental property, you’ll want to read this article. We’ll cover the local laws and regulations, how much to increase the rent, when the best time is to do it, and reasons to increase rent.
How Much Can You Increase the Rent in San Francisco?
It’s no secret that San Francisco is an expensive place to live and rent. To avoid the market from becoming too expensive for people to live in the area, the local government has enacted specific rules and regulations when it comes to rent increases.
For example, between March 1, 2021, and February 28, 2022, landlords in San Francisco can only increase rent by 0.7%.
Each year, there is an annual percentage which a landlord may increase the rent with proper notice given to the tenant. This can be done once a year, usually on an “anniversary” of the tenant’s lease.
If the rent increase is to occur before the anniversary, the landlord must provide written notice of the proposed increase at least 30 days before. If the increase exceeds 10% of the current rent, then 90 days’ notice must be given to the tenant.
A good rule of thumb when increasing rent without limitation is 3% to 5% of the current rate. However, this is always subject to the situation. If a property has recently been completely renovated, then there is room for a greater increase.
The Best Times to Increase Rent
There are two times when a landlord should increase the rent of their property. The first is when a tenant is going to renew the lease. The second is when acquiring a new tenant.
As discussed above, landlords can increase rent in San Francisco on the anniversary of their tenant’s lease. After signing a lease, the tenant has agreed to pay the amount stated for the lease’s length. However, when signing a new lease, you may propose a new price.
There is a disadvantage to this, though. If a tenant does not want to pay an increased rent, they may choose not to renew. This is up to the landlord’s discretion whether or not to increase the rent.
Acquiring a New Tenant
San Francisco doesn’t have any limitations on how much a landlord can initially charge for rent when acquiring a new tenant. So, if your current tenant has moved out and you want to increase the rent by 20%, you can.
However, it’s wise to examine the current rental market to keep in line with your area’s prices. A rental property priced way too high will stay vacant for weeks, maybe even months. Find comparable properties to determine your increased rent price.
Reasons to Increase Rent
There are multiple reasons why a landlord would decide to increase the rent of their property in San Francisco. The number one reason is to increase passive income. However, there are other factors that could contribute to wanting to raise the price of rent.
Taxes Go Up in the Area
It seems like taxes are always increasing, never decreasing, right?
This is a major reason why a landlord would consider increasing the rent for their property. When they have to pay property taxes or even sales taxes on the services and utilities they use, they may want to balance these higher taxes by increasing the rent.
The Property was Renovated
Many landlords decide to renovate their property to increase its value. This could be a complete rehab of the house or just an update to the kitchen and bathrooms. Either way, when the value of the property goes up, the rent justifiably increases as well.
To know how much you should increase the rent, find comparable properties in the area and see how much they rented for. This will help you determine the new rental price. You could also get a professional appraisal of the property.
Keep Up with a Rising Market
To do well in real estate, you must keep up with the market. With such volatile movements, as a landlord in San Francisco, you must stay up to date with current trends. This means increasing and sometimes lowering your rent as needed.
If there are more renters than vacant properties, then you have room to increase the rent because there is a lot of competition. But if there are too many vacant properties and not as many buyers, then you’ll have to lower the rent to stay competitive.
We’ve discussed how property taxes can increase, but your general expenses can increase as well. This could be HOA fees, maintenance fees, replacing certain appliances, or even an increase in the utilities you use.
You don’t want to lose revenue just because your expenses are rising. Counteract these rising expenses with an increase in the rent.
Increase Your Rental Income with a Professional Property Management Company
There are more ways to increase your rental income than simply raising the price of it. When you work with a professional property management company, your tenants will receive high-quality service, attention, and maintenance management.
Plus, working with a property management company allows you to promote your vacancies to a larger network and acquire higher-quality tenants who will pay rent on time and take care of the property.
Sharevest Property Management is San Francisco’s leading property management company. If you have a rental property in the area and need help and guidance managing, maintaining, and increasing rent, then we’re the answer you’ve been searching for!
Contact us and speak to one of our expert team members about how we can help you increase your rental income today!