2 year lease

Hi everyone.

I have just been informed that my tenants want a 2 year lease on the property.


what is the best way to negotiate a price?

It is currently leased for $400, but houses that are similiar are now asking $450.

when we leased it out we were struggling to get $400,but now the markets picked up.


can i put it up to $450 and then how do i negotiate a price for the 2nd year.

this property is negatively geared so any extra dollars would help.

any advice would be appreciated.
 
I have just been informed that my tenants want a 2 year lease on the property.


what is the best way to negotiate a price?
One of my tenants prefers the stability of 2 yr leases. The start of the 2nd yr is always $10 extra. It gets marked to market every 2nd yr. He's a good tenant. It's good for both of us to remove the big unknown of vacancy or losing your home or big rent increase. Being under-rented by (say) $10pw for a year is peanuts when compared to the big picture.
 
be careful tho - i signed a lease up for 3 years thinking i was being clever - adjustments for CPI in there. anyway, as everywhere has done, rents shot up dramatically and it ended up being very under market rate. In Perth rents are expected to jump $100 a week over the next year and it would be hard to sell that to your tenants i.e. $400 this year, $500 next year. Given that they clearly dont want to go anywhere, what advantage are you getting by signing it up longer? If you say no its only 12 months for now are they really likely to get up and leave?
 
You have many possibilities.

I assume you would like $450pw for the first year and $500pw for the second year. The total of these equate to rental income of $49,400 or an average of $475pw over the 2 years.

Option 1: Write it up as a two year lease at $500pw but offer the last 5 weeks of the lease as rent free. (Rental income is 52x2 -5 x$500= $49,500)

Option 2: Write up a lease at $450pw with a special condition that rent will increase in 12 months to $500pw.

Option 3: Write up a 2 year lease at $475pw with no adjustment.

Personally, my preference would be to go with Option 1 as it makes it easier to bump the rent up next time (after 2 years) and in addition it looks better from a serviceability aspect with the bank as it will show $500pw.
 
The number one question on my mind is am i legally allowed to increase the rent by at much as $50 - $100.

I thought you could only increase by 3%.

they are great tenants, but i really need to be charging 450 -475 as this is the going rate for this type of house and again it is very negatively geared.

i know i could find new tenants straight away for 450 or 475 per week.

again can i legally raise the rent by that much.?
 
Marina

If there is an existing lease you are bound by the conditions of that lease (ie rental rate and term).

If the lease is up for renewal, then you can advise the tenants of the new rental rate you require with one months prior notice (maybe longer in Vic?)

Tenant then has the option of either accepting, negotiating or leaving. There is no maximum increase (as far as I am aware).

If you can't agree a figure, then tenant will leave and you can get a new tenant in at whatever rent they are prepared to pay.

The balance is to get a rate that you are happy with and at renewal time increase it by a level that makes it not worthwhile for the tenant to consider moving. Most important set the initial rate to as high a level as possible to start with by offering tenant free rental periods at the end of the lease.
 
Look I'm going from memory here, but we recently bought an IP in SE QLD and it is about $20 - $30 pw under value. The lease expires in Oct and I've notified the management agency to increase it to market level.

When we bought the place with the tenant in place I'm sure the agent said that you have a maximum percentage that you can increase the rent, but if this increase is over the legal allowable amount according to the terms of contract then you can get a separate market appraisal done by some neutral company body to justify to amount of increase to bring the rent up to true market value.

You may want to chat to your property manager about this or the real estate institute in your state or territory.... sorry I don't have more detail, but as I said I'm going from memory and it was just a passing comment.

Martin :confused:
 
The number one question on my mind is am i legally allowed to increase the rent by at much as $50 - $100.

I thought you could only increase by 3%.

they are great tenants, but i really need to be charging 450 -475 as this is the going rate for this type of house and again it is very negatively geared.

i know i could find new tenants straight away for 450 or 475 per week.

again can i legally raise the rent by that much.?
If you are creating a new lease you can charge anything you like.
Charge $2000 a week if you like.

If the market supports your claim of the rent you want , then your tenant will also find out the same information soon enough
 
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