Most landlords price a renewal one of two ways: they round up from last year's number, or they guess at what the market will bear. Both skip the two things that actually determine whether an increase makes you money: what the unit is really worth right now, and what it costs you if the increase pushes the tenant out. Here is a method that uses both.
1. Start with the market, not a gut number
Before you decide on a percentage, find out what your unit is actually worth today. You do not need special software for this, just a half hour and the listing sites you already check.
- STEP 1Pull 3-5 comparable active listings.
Same bedroom/bathroom count, similar square footage, similar building age and condition, within a radius that makes sense for your neighborhood. Zillow, Apartments.com, Craigslist, and local rental Facebook groups all work.
- STEP 2Adjust each comp for what is actually different.
A unit with in-unit laundry, a reserved parking spot, updated appliances, or a better floor is not directly comparable to one without. As a loose reference point only, amenities like these often move rent somewhere in the range of $50 to $150 a month in many markets. Use what you see in your own comps over this range; local supply and demand matters more than any generic number.
- STEP 3Land on a market-rent number.
Average or take the median of your adjusted comps. That is the rent a similar, currently-available unit is actually renting for, which is a very different question from "what did I charge last year plus a bit."
2. Translate the gap into a renewal ask
Once you know the market number, compare it to what the current tenant pays. A wide gap does not mean you should close it in one renewal. Jumping a good tenant straight to market in a single step is one of the most common ways landlords accidentally trigger a move-out they did not want.
Most states have no statutory cap on rent increases, but a handful of states and some individual cities do cap annual increases, and some require longer notice above a certain size. This varies by state, so a rule of thumb is not enough on its own. HUD maintains a state-by-state directory that links out to each state's renting and tenant-rights resources: hud.gov/states. Confirm the rule where your unit actually sits before you send a number.
With that checked, a common approach for a tenant in good standing is to anchor the increase to a modest, defensible range, roughly 3% to 5% a year as a starting point, and phase in a larger gap to market over two or more renewals rather than one. It keeps the ask explainable and reduces the odds the increase itself is what tips the tenant toward moving.
3. The math that keeps you honest: what turnover actually costs
A bigger increase looks like more money on paper. It only actually is more money if the tenant stays. Before you finalize a number, run it against what it costs you if this increase is the one that makes them leave: the weeks the unit sits empty, the make-ready work, and the cost of finding the next tenant.
The general shape of the math:
Turnover cost ≈ (vacancy weeks ÷ 4.33 × monthly rent) + make-ready costs + re-leasing costs.
Here is one illustrative example, with every assumption stated so you can swap in your own numbers:
Worked example: a $1,800/mo unit
Illustrative only, not a benchmark. If you use a leasing agent, add roughly one month's rent in fees on top in many markets. Your own vacancy length and make-ready costs will vary with your condition, location, and season.
Now weigh that against the increase. An extra $150 a month is $1,800 a year, which sounds like a clear win. But if that particular increase is what tips an otherwise-happy tenant into moving, the roughly $2,200 in turnover costs above, plus the very real chance the next tenant also does not stay a full year, can erase more than a year's worth of the gain you were chasing. The rule that falls out of this: if the annual value of the increase you are considering is smaller than what you would lose if this tenant leaves because of it, you are not gaining, you are gambling.
4. When not to raise the rent
- The tenant is already near market. A small further increase adds turnover risk for a gain that is easily wiped out by one vacancy.
- The tenant has a strong payment and maintenance history. Reliability has value beyond the rent line: fewer vacancies, less turnover-related wear, and fewer surprises.
- You are mid-lease, not at renewal. Changing rent before the term ends usually needs a lease clause that allows it or the tenant's agreement to amend, not a unilateral notice; check your lease and local law.
- The local market is softening. More vacant comparable units and longer days-on-market both raise the odds that raising into a soft market backfires as a vacancy.
- You would rather trade rent growth for stability. If you are planning to sell soon or simply want a low-hassle year, a smaller increase that keeps a good tenant can be worth more than the marginal dollars from a bigger one.
Put it together
Pull comps and land on a market number. Check whether your state or city caps the increase or requires extra notice. Pick a defensible percentage, phasing in a big gap over more than one renewal. Run the turnover math before you finalize it. Then decide, with the actual numbers in front of you instead of a guess.
TenantPulse does this math for you
This guide is the manual version. TenantPulse reads your local comps and each tenant's renewal risk automatically, then drafts the offer and the outreach email for you to review and send.
Free early access, no card, no sales call. We email you the day it opens and lock in the founding price.
Frequently asked questions
Is there a simple rent increase calculator I can just plug numbers into?
This guide is the manual version of one: pull your local comps, adjust for differences, then check the number against turnover cost before you send it. A true calculator needs your specific comps and this tenant's own renewal risk to be more than a guess, which is the part TenantPulse automates.
How much can a landlord legally raise the rent?
There is no single national percentage. Most states have no statutory cap at all, but a handful of states and some individual cities do limit annual increases or require extra notice above a certain size, and rules can change. Confirm the rule where your unit sits before you finalize a number; HUD's state-by-state directory (hud.gov/states) is a solid starting point.
How often can I raise the rent?
For a fixed-term lease, generally at renewal, not mid-term, unless your lease has a clause that allows it. For month-to-month tenancies, landlords can typically raise rent with proper written notice, but how often and how much notice is required varies by state and sometimes by city. Check your lease and your local law.
What is a fair rent increase percentage?
As a rough starting point, many landlords anchor a good tenant's renewal increase somewhere in the 3% to 5% range per year and phase in any larger gap to market rent over more than one renewal, rather than jumping straight to the market number. Treat this as a heuristic, not a rule, and always weigh it against what losing the tenant would cost.
How much notice do I need to give before a rent increase?
Notice requirements vary by state, and sometimes step up further for larger increases. Our lease renewal letter guide covers common 30/60/90-day conventions, but your lease and your state or local law both govern and the stricter one wins, so confirm before you set a date.