Advised to put rent up $30 pw!

N

neaka

We have received notification from our PM that our tenants lease is due to expire. They have also said that in line with current rental markets they recommend we put the rent up anywhere between $10 and $30 a week!!

I wouldnt normally have an issue with rent increases but we have a lovely tenant in who we want to keep! She has been in for 1 1/2 years and we have not yet increased her rent so it is definitely due but how much is fair to not lose her?

How do you find a balance between keeping a good tenant happy and not letting them walk all over you out of fear you'll get a bad one? I feel a good tenant is worth more than $10 a week (we had bad tenants and its not worth the stress!!!)
TIA
 
They might be worth $10 a week. But if you consistently keep your increases lower by $10 a week, then after 2 years that's $40 a week. Are they worth $2k a year? It's a slippery slope.
Alex
 
Write your tennant a letter and say than inline with current market conditions that the rent is due to increase and comparable rents are $30 per week more. However, although interest rates have risen dramatically you are prepared to absorb some of this cost and only raise her rent $10, as she has been such a good tenant.

Everybody happy - you get the rate increase and she feels that she has been saved from something worse.
 
On the other hand, if you really think the risk of getting a bad tenant is worth $1k a year, go ahead. Just remember next year you'll be increasing by $20pw less again, so that's $2k you're forgoing.

I was looking at one property I have in Perth. It's probably about $60pw under-rented. I hadn't been paying much attention to the PM notices about rent increases (very small ones) and now I'm losing out. So I'm increasing now and again in 6 months.

Given the vacancy rate I doubt I'll have problems finding a tenant.
Alex
 
For a tenant, there is not only the cost of finding another propoerty cheaper, there is the cost of moving etc.

Cheers,

The Y-man
 
You could put it up $15 now on a 12 month lease, with another $15 written into the lease in 6 mths.

I did that recently with a great tenant who wanted the stabiity of a 12 mth lease.:)

jo
 
Don't let your rents fall too far below market rates. If you feel the need to give them a discount - keep it at a constant $10/20pw, which will mean they are still due to have increases at every renewal, but the rent will still remain at that discount.

If you are charging less than market anyway, where will the tenant move to if you are only increasing the rent in line with other properties in the area? The further you let it slip away from market - the higher (and more painful) the eventual revalue to market will be, unless you plan to give them an ever increasing discount.

We're currently experiencing rapid market increases in some of our areas, and I'm making sure the tenants get issued the $10pw increase at the 6 month mark so it's not such a big hit at the end of the lease.
 
neaka said:
but how much is fair to not lose her?

How do you find a balance between keeping a good tenant happy and not letting them walk all over you out of fear you'll get a bad one? ITIA
Click to expand...

Well I always put the rent up,but my wife always has the same worry as you do.....too much emotion and investing is a numbers game - no room for emotion. BUT the cost of moving is say $770.00 or similar - just divide by 52 = $14.80 per week to move. Make it about $15 per increase (each 6 months at the moment) and it is not worthwhile any tenant moving (if all else is OK).

Plus they have the effort of packing/unpacking. reconnecting utilities and it is just too much effort to move.

Cheers,
Aimjoy
 
josko said:
You could put it up $15 now on a 12 month lease, with another $15 written into the lease in 6 mths.

I did that recently with a great tenant who wanted the stabiity of a 12 mth lease.:)

jo
Click to expand...

Agree with josko. Allows the tenant time to budget for the increase and gives you a steady increase over the 12 months. Don't forget your costs would have risen (ie interest rates, insurance etc).
 
The rent on my IP went up $10 in Feb. $230 to $240. Got a call last week from the PM advising they are moving the rent to $260 in 60 days.
 
I read this thread this morning and had me thinking because my IP contract runs out in 2 mounths.................
and thought about this all day and Im going to ask for the $30 increasement
 
My IP rent recommended by PMs have gone up by $25 to $40 per week and in most cases it is less than market rate. In all cases the rent increase does not cover the IR increase. I have to maintain my serviceability as much as possible although the increase seems steep most tenants should be able to cover them with their reduced tax rate. :)
 
Investing in property is a business. You need the best possible return for you business, so you should keep you rents at market rates.

If your tenant doesn't like it, they will have to move elsewhere, but be realistic & think to yourself, where else can they really go. Moving costs money AND they will have to pay market rates at the new place. So, overall, they are better off just absorbing the increase than moving.

I have never had a tenant move because of an increase in rents.

Also, if you are proactive in increasing rents, they will get used to small increases regularly, rather that a large one all in one hit.
 
skater said:
Investing in property is a business. You need the best possible return for you business, so you should keep you rents at market rates.
.
Click to expand...

I agree. Friends of mine own a house but she is too emotionally attatched. The tenant Emails her telling how poor she is. My firsnt even paid the electricity bill because she feels sorry for her.

I think it's give and take a bit though. One of our tenants has been in since August. Never heard from them until last month. Always paid on time. We got a call from PM after big storm saying the hot water was out. Fine told him to send someone out straight away. Fixed $125. Same day he rings saying stove is out (Thursday) my hubby says he'll come and fix it Monday. Tenant says no I use it EVERY day (does anyone do that?). Anyway we had to pay someone to fix it. Cost an extra $150 on top of parts.
Next week PM rings saying the tenants miscalculated their pay and rent will be a week late. I think that's rough. Takre and no give on their part. Rent is going up ASAP.
 
I've put up a couple rents $60 p/w each and another couple $50 p/w.

Business is business and not a charity. The market dictates what the going rate is.

Like Alex says your lenders passing on market conditions to you.
 
Our agency has just advised us to put the rent up $40; from $330 to $370. This would still be under market rent of $400. In Queensland we can also now charge for water useage too...
 
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