6 Things to Know Writing a Friendly Rent Increase Letter

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Your tenants find this hard to believe, but one of the most difficult tasks for a landlord is notifying them of a rent increase. Adding to that general reluctance is the new world of COVID-19 that has an impact on just about everything. Additionally, there is the unmatched economic anxiety that everyone is feeling these days. 

The Good News — Most Tenants Do Renew

There is good news, nationally about 41% of renters plan to renew their leases, and another 37% are still undecided. That’s a strong retention rate, and in normal circumstances, a quick email notifying your tenants of a rent hike isn’t that big a deal. However, these times are far from normal. 

Nonetheless, you are running a business and must keep your end of things in the black. The inevitable upshot is that rising costs for you means an increase in rents for them in the midst of an economic and public health crisis. How do you let your tenants know their rent is going to go up when they may have been furloughed from their jobs? 

  1. Educate Yourself
  2. Rules and Regulations for a Rent Increase
  3. Educate Your Tenants
  4. Make It Personal
  5. New Rules to Address COVID-19 

Educate Yourself

One of your primary responsibilities as a landlord is to be aware of and abiding by local real estate rules and regulations. Washington, DC is a rent-controlled city AND a government town, so there are stringent rules and lots of departmental layers.  Each unit must be registered with the Rental Accommodation Division (RAD), which is part of the Housing Regulation Administration’s (HRA) Department of Housing and Community Development (DHCD). Per the RAD, rent may be automatically increased based on increases in the Consumer Price Index (CPI-W); up to 2% more than CPI-W. But regardless of inflation, the increase can’t exceed 10% of the previous rent. If your tenants are elderly or disabled, the ceiling on an increase is 5%. Knowing your tenant’s age is pretty transparent — it’s on the application — but Fair Housing guidelines make it a challenge to be aware of some disabilities. 

Woman studying a rent increase

Rules and Regulations for a Rent Increase

On a broader note, don’t forget other regulations regarding rent increases.

  • Rents may not increase more than once every twelve months
  • A rent increase cannot be implemented to get rid of a poor tenant
  • Rents cannot be increased retroactively
  • The tenant must be given thirty days notice
  • Property is in compliance with housing regulations

If you own fewer than four rental units in DC, you are exempt from rent-control policies.  Virginia has no rent control, and neither does Maryland on a statewide level, but some DC suburbs like Takoma Park have implemented controls. 

Educate Your Tenants

From your tenant’s perspective, a rent increase is a money-grab on your part. They see the rent they pay as cash in your pocket, and seldom consider your mortgage payments, taxes, and maintenance costs. This is not to say you should send a cost-analysis spreadsheet with the rent increase letter, but that you should mention repairs and improvements you have made to the property during the lease period. If you have replaced the roof, bought new appliances, painted, or had some trees removed, bring it up in a friendly way — “I hope you’re enjoying the new dishwasher” or “it’s been a lovely spring to sit on the new deck” as a gentle reminder that you have incurred some capital expenses. 

Also, don’t be afraid to let your tenants know that real estate taxes have gone up, or county service fees for waste management or water, and that you need to pass some of those costs along. If you are sending an email, include a section with links to the relevant data so your tenant appreciates your transparency. 

Make It Personal

A key consideration in notifying tenants is in keeping them on–you never want to lose a good tenant, but in the current environment you may not be able to find a new one.  Approach the rent increase as a business agreement between partners instead of a demand. Make your letter warm and personal–no boilerplate “Dear Tenant” greeting; use their names. The subject of the notice should be something non-threatening, like “Change in Rent Notice” rather than “Rent Increase Coming”.  Let them know that you are available to answer any questions or concerns, and finally, thank them for being your tenant. Sign off on the letter with a personal closing–“all the best”, “thank you”, or something equally warm. 

Person notifying person of a rent increase

New Rules to Address COVID-19 

Those rent increase notices you sent you tenants in early March? For the most part, they are null and void during the pandemic. In DC, you can’t raise any rents or even charge late fees until 30 days after the emergency is lifted. In Virginia, you can’t evict a tenant for non-payment during the pandemic, so there is no real point to even trying to increase rents until after the crisis has abated.

In the District, rent increases are prohibited from taking effect during the defined public health emergency. Further, rents are stabilized even if notice was given during or prior to the emergency. Any rent increases are on hold until after the state of emergency is lifted. 

In Maryland, Montgomery County has implemented a rent-hike limit of 2.6% during the pandemic and for 90 days following Governor Hogan’s lifting of the state of emergency. There was great dissent among the county commission on the wisdom of any rent increases during the crisis, and finally, they agreed to codify what had been a voluntary rent increase standard. Over 30% of county residents do rent, and some unscrupulous landlords had attempted to raise rents up to 60% at the beginning of the crisis. 

Prepare Tenants for a Rent Increase 

Now is a good time to lay the groundwork for life and rent increases post-pandemic. Let your tenants know that their well-being is paramount for you and that they should feel free to contact you with any concerns about their lease going forward. Take every tenant as an individual; a one-size-fits-all approach does not work in these scary and uncertain times. As long as you keep open and honest communication with your tenants, rent increases should not be a surprise. 

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Enhanced Reporting

Your portal includes a selection of extremely useful reports. Reports are available in the “Reports” section, and are distinct from the financial statements. Unlike financial statements which are static records, Reports are dynamic real-time records that will update with current data every time you view them. 

Scroll down to learn more about Reports:

Navigate to the "Reports" module in your portal:

  • Keep in mind, these reports are dynamic records. They will refresh to display current information every time you view them. 

Enhanced Rent Roll Report:

  • The Enhanced Rent Roll Report will show the rent amount, last payment date, move-in date, lease expiration date, and security deposit amount for each of your tenants. 
  • It will also show a portfolio summary with occupancy percentage, vacancy loss, and more!

Unit Comparison Report:

  • If you own multiple units (or buildings) with Nomadic, you’ll get access to the Unit Comparison Report. 
  • This report enables you to quickly compare financial performance between your units at a glance without toggling between individual reports. 

Income Statement Month-Over-Month:

  • The Income Statement Detail – Monthly Report serves as a month-over-month record of portfolio performance. You’ll see itemized income and expense categories and can track monthly. This report will update with fresh data every time you view it. 

Financial Statements

Financial statements will be published to your portal on a monthly basis. The statements are found in your Documents library, and provide a historical record of all financial performance. The statements serve as a snapshot of financial performance over a given period, and are static documents (unlike Reports, the statements do not update/change in real-time). 

Scroll down for more info about the Financial Statements in your Documents library:

The Documents area contains monthly financial statements:

  • The statements in the Documents are are static documents. They are posted to the portal once a month to serve as a historical record of financial performance. 

Download a statement to see month and YTD financials:

You'll also find a month-over-month operating statement:

Portal Communication Tool

You can use your owner portal to communicate with our team. Any messages you send through the portal will go straight to your Account Manager. When we reply, you’ll get an email notification and you’ll also see the message in your portal next time you log in. 

Here’s an overview of using the communication platform:

Click "Communications" and navigate to "Conversations":

  • The communications module will contain a record of all messages that you create through the portal. 

Click the "New Message" button and send your message:

Responses will show up in the conversation ticket:

  • You’ll get an email notification whenever you get a response, and you’ll also see the message in your portal next time you log in. 

You can reply in-line using the comment box:

Each conversation will be logged in its entirety:

Understanding the Ledger

Your portal includes a ledger with all transactions. The ledger is populated with data in real-time as transactions flow through our accounting software. Much of this information is also available in the Reports area, as well as the Statements in your Documents library, but the ledger is the most comprehensive resource for diving into the details. 

Please scroll through the sections below to get a better understanding of how to interpret the ledger. 

By default, transactions are sorted chronologically:

  • The date reflected in the lefthand column is the actual transaction date, not the “bill date”. This is the date the transaction was actually processed. 

If you have multiple properties with Nomadic, you'll see the address for each transaction in the "Location" column:

  • You can filter the ledger to look at just one property, all properties, or specific sets of properties. 
  • If you only have one property with us, you’ll just see the ledger for that property. 

The Description column displays the transaction type:

  • BILL: this is an expense transaction, such as for repair costs or management fees.
  • CHARGE: this is a transaction  billed to the tenant, most typically a rent payment. 
  • NACHA EXPORT: this is a credit we processed to your distribution account. This type of transaction is how you get paid! 

The Amount column shows the dollar value of each transaction:

  • Positive Amounts: if an amount is positive, it reflects a transaction that is payable to you. Typically, this will be a rent payment that we collected from your tenants. On occasion, a positive number could also signify a journal entry or credit adjustment. 
  • Negative Amounts:  if an amount is negative, this is a transaction that is either payable to Nomadic or is an amount that has already been paid to you. Typically this will be for repair costs or management/leasing fees. Owner draws (net distributions into your checking/savings account) also reflect as negative amounts, since they have already been paid to you. 

The Account Balance column shows a sum of positive/negative transactions at a given point in time:

  • Account Balance should always equal zero after a net distribution has been processed. When the balance is zero, this means that all expenses have been paid and you’ve received the remainder as net operating income, leaving a balance of zero (meaning: no one is due any money, as all funds have been distributed appropriately). 

Navigating the Propertyware Owner Portal

Your portal includes some extremely useful features that help you understand your property’s financial performance at a new level, with real-time transparency into every transaction.

Scroll through the snapshots below for an overview of portal navigation! If you need more help or have specific questions about using the portal, you can reach out to your Account Manager any time for a screen share. 

You can filter all info by date range or property:

View a snapshot of income and expenses on your dashboard:

See every transaction in real-time on your ledger:

Statements and forms will be posted to your documents library:

View a suite of real-time financial reports:

See a running list of all bills, and drill down for more detail:

Under Bill Details, you'll find dates/descriptions/amounts and more:

You can also communicate with your Account Manager through the portal:

How do net distributions work?

Net distributions keep your accounting clean and simple. Each month we’ll collect rent from the tenants, deduct any repair expenses for the previous month and any management/leasing fees for the current month, and credit the remaining net operating income to your account. 

You’ll receive a statement via email each time a net distribution is processed, and can view all transaction details in your Propertyware owner portal.