Every stable economy is going to have inflation, and as prices go up, so must self storage rent. As a self storage operator, you probably don’t like raising rent on your tenants any more than they like learning that the rent is increasing. However, with the right steps, customers will be more likely to accept paying a little more every month.
It’s important to have a good reason to raise the rent, to not raise it too much, and to do it lawfully. These suggestions should help.
Mention It in the Contract
Your contact with each tenant doesn’t have to include an exact amount that rent will go up every year. In fact, putting that in would give you less flexibility in how much, or how little, it needs to go up. However, you may want to include a sentence or two saying that the rent is subject to an increase due to inflation and increased costs. That should seem completely reasonable to most tenants.
How Often and How Much
So that you’re aware of what you’re allowed to do, look into the rent increase laws in your state. Most don’t allow a rental increase any more than once per year. There will also be a cap on the amount you can raise the rent, which will probably be a percentage of the current rent.
Once a year is a reasonable time to raise rental prices on your units, if you need to. Has your facility added new features that benefit the customer? For example, if you have an improved security system, that’s an additional expense that benefits your tenants. How much more do you pay to keep up your services now, expressed as a percentage? Two percent? How much has inflation raised the cost of everything? Three percent?
So, if you’re spending five percent more per year on business expenses, then that’s how much you might want to raise everyone’s rent. Someone renting a 5x5 for $50 per month would get a rate increase of $2.50, and the new payment would be $52.50. Someone renting a 10x15 at $150 per month would get a rate increase of $7.50, and would pay $157.50.
It’s better to raise the rent a small amount every year than to wait for four or five years and hit tenants with a large increase.
Informing Your Tenants
You will need to create a form letter that, when printed, gets populated with specific customer information. This is easy to do in Microsoft Word, but see what works with your database software.
You don’t have to justify the increase. It only has to be legal. However, every time you raise the rent, you risk losing tenants, so it doesn’t hurt to explain why the rent is going up.
Also, provide 60 day notice to your monthly tenants, even if legally you only have to give 30 day notice. This courtesy can make it easier for them to plan any changes to their budgets.
The letter should follow a certain format. Use company letterhead with the company name at the top and center of the page. The name and address of the tenant goes on the upper left.
Two lines down, type the subject. It should be something like, “Re: Monthly Rent Increase.” Two lines after that, insert the greeting, “Dear Tenant Name:” where the “Tenant Name” is the name of the tenant.
In the opening paragraph, explain why the rent is increasing. Also, explain that you value their tenancy and that you’re raising the rent for good reasons.
In the next paragraph, state what the new rent will be, how much the increase was, what the old rent was, and when the new rent starts. It should be something like, “Your new rent will be $52.50 per month, which is a $2.50 (5%) increase over your previous rent of $50 per month. The amount of $52.50 goes into effect on June 1.”
In the final paragraph, let them know what steps to take next. They can accept and start paying the new rental amount on the stated date. If they choose to leave instead, they can follow normal moving-out procedures before the new rent goes into effect. Depending on the laws of your state, you may need to ask tenants who are staying to sign a new contract.
End the letter with “Sincerely,” followed by four lines, and the manager’s name. Sign each letter after “Sincerely.”
Send the letter by mail. In some states, you’ll need to add five days to the notice period when sending a letter, so send it out 65 days in advance instead of 60.
You probably won’t be able to satisfy everyone. However, done thoughtfully, raising the rent doesn’t have to be a painful process for anyone, and you’ll minimize the number of tenants you lose due to the increase.