An idea to think about

[markpatric]

Rents increasing?.

Can anyone give concrete actual examples of rent increases over the last few years and give opinions on what level of increases would be expected over the next few?, and why?.

 

[skater]

Gosh, Markpatrick, what a hard question to answer. The amount of rent increases (or decreases) will be dependant on many different things & each little area of the country will be different.

For instance I recently sold a small 3brm house in Launceston that was generating $175pw rent. I bought it about 5 years ago when the rent was $135pw. I consider this to be a terrific increase in rent & was quite pleased with it. I have another small 3brm house in Traralgon Vic, purchased only slightly after the Tassy property. It was getting the same amout of rent ($135pw) when we bought it. Today it is getting $145pw. Not so great. Yet I still consider it a great investment as it was bought with a yield of around 12% & has more than doubled in price.

Compare this to another small house in Campbelltown NSW bought 1998 getting $185pw rent. This house went up to $210, then back down to $185, and is now sitting at $205. Then move on to a 3brm in Regional NSW with a yield of $230pw two years ago which went down to $200 and is now in the process of going back up to $210.

My view of what I see for the immediate future? Hopefully rents will go up across the board as more people sell off investment properties. This will give more servicability to those of us that are here for the long haul.

 

[gooram]

We bought a 2bdrm villa 2 years ago, we increase the rent from $170pw to $185pw after about 18 months. The plan for now is to keep increasing as the market allows. We expect to raise it to $200pw mid 2006. On average about $10/year.

After the last "boom" in property prices, we should expect rents to catch up a little while prices plateau. But as skater says there's so many variables.

 

[markpatric]

That`s a great reply Skater because it has it in a nutshell, this is my experience as well.
Investors often talk about raising rents with or without renovation, or paying a certain amount for a home and banking on a certain steady increase which may or may not happen in order for them to CF.

If someone is not too happy in an area it will only take a small saving for them to up and move somewhere cheaper I have found.
The trick it seems is to find good tenants charge them a little less than market rent and look after them like gold!.
For the inexperienced it also pays to remember that if your property takes as long as four weeks or worse yet months, to rent, rather than right away due to it being to high, it can very easily and quickly become a bad move when you add up the figures in seeking the higher rent.
Doing the numbers, say you raise the rent from $100 a week to $110 on a vacant property and it takes four weeks to rent, this of course is $400 extra rent you would have had at the cheaper rental.
On the $110 per week it would actually take 40 weeks of continual rental payments before you caught up to this cheaper total.
The only way this could be beneficial to hold out for the higher rent is if selling is on your mind, the higher rent of course may make this easier or get a higher price, a real double edged sword!.
Imagine if the figures were $400 per week seeking to raise to $450 and ten vacant weeks, ten weeks goes by in the blink of an eye.
It becomes a bigger badder snowball very quickly in that it would cost you $4000 in rental losses to begin with and around 80 weeks of continual rental to reach the same rental income total.

 

[beech]

The trick it seems is to find good tenants charge them a little less than market rent and look after them like gold!.
For the inexperienced it also pays to remember that if your property takes as long as four weeks or worse yet months, to rent, rather than right away due to it being to high, it can very easily and quickly become a bad move when you add up the figures in seeking the higher rent.

Agree 100% MP,

I watched a unit sit empty in Melbourne for 6 months because the landlord wanted $250/week and not the $230/week it was worth.

How many months to get that lost rent back.

 

[redwing]

One of my IP's was a bit hard to rent a few years back so i dropped the rent $10 per week, then two weeks later another $5 and got some tenants in, when they left I raised it $5 and it was rented again quickly as it was below the median for the area, a year later I raised it again $10 and have just recently raised the rent again for this tenant (still below market, but the tenant is great signs up for 6 months each time and we're both happy).

I've also refinanced against the above IP to assist with a new IP as I only owed $80k on it it was renting for $160 p/wk (now $165 p/wk and loan is $170k)

Other IP's have rented straight away, all at above median rents in the areas in my opinion, one of these has all furniture included as well.

I'm happy to rent at below market if need be and am also aware of the need to secure a good tenant rather than rent to the first person who walks in..


REDWING

 

[alwayscurious]

Large Rental Increase (under rented --> proper)

I kind of bumbled into property investing and ended up very happy:

I bought a house that was under rented. Very.

The area was going through a rental increase at the time, but this house was being under rented by an agency a Long way away (over 1 hour drive). The investor was interstate and unwell, and wanted to quit.

Tenant struggled to pay $170 when I bought, and was constantly late etc. The agency lady (about same age, 19 or so) was kind hearted, naive & non business like. The tenant spun her on for ages and ages, sigh.

I moved it to a new agency, and the tenant moved on of her own accord about a month later, when the lease was due, and once the agent asked her to bring rent up to date.

I fired that new agency after initial tenant troubles & slackness, and moved it again (Learning, sweating, learning)

The new agency then bumped the rent up $50 per week to bring it into line with the market. Wow. I didn't know it had moved that much!

Then the rental was bumped up 2 -3 times after that to bring it into line as the market moved up quickly in that area.

The new agents found a great family that wants to stay.

I tentatively applied a Dolf de Roos trick & said - anything you want in particular before they move in - how about Air con for $10 extra per week?

They jumped at the chance to get an air con living room!

So The rent now is $80 per week more at $250, that is within a 2 year period.

Tenants love the house, want to stay forever, parents live around the corner, kids ride bikes to school.

I try to do one nice thing per annum, this year it was air con, last it was gardens..

Yippee! Fluked out on that one!

So I am looking for another under-rented place now!

It was half luck, and half good advice - get great managers on your side!

 

[markpatric]

Way to go!.

 

[Peter 14.7]

I have lived in my PPOR 9 years and my neighbour has been always able to rent his terrace for $300 rising to $320 to $340. This was way under market at the time as the neighbour was getting $400.

For the first time he is asking $360 and is it vacant 8 weeks. Why I asked him.

Lots of lookers but the market here in Syndey City is saturated with property for rent he says? Seems to conflict with agents but I belive the reality not agent hype.

Peter 147

 

[markpatric]

Very often on the surface it can seem to make little sense but generally there is a solid reason if you know the circumstances, in my experience at least.

I wonder what were the circumstances with the neighbour paying $400.
Big tV, air con, views, maybe a wealthy tenant who needed somewhere fast and was happy to stay on even if paying a little more than market, could be it`s close to the tenants workplace or family, could be a hundred reasons why someone might pay more than fair market rent in rare cases.

I suppose there is always a reason but the landlord game can certainly be a bit of a lottery at times.