Artifically increasing the rent

[georgie1]

I plan on selling my investment property within the next 3 months and my property is about to become vacated. It will most likley be purchased by another investor so is it worth me giving the next tenant a 12 month lease and $10,000 via a private deed in exchange for lifting the rent $150 extra over the market rent. The $7,500 will cover the increase and the other $2,500 will keep the tenant quite during the marketing process.

Looking at comparables this should easily add an extra 30k-50k in value.

I was wondering if this is illegal as this practice always goes on in commercial property.

Thanks

 

[wylie]

Why would any purchaser not think the rent is way too high and smell a rat?

And what if you pay your tenant $10K and he skips?

I cannot see many people fooled into thinking your house is worth an extra $30K or more based on an inflated weekly rental amount.

 

[Aaron_C]

The rental is less important for a residential property than it is for a commercial one when it comes to valuation so it probably won't make too much of a difference unless the purchaser is someone chasing yield.

 

[georgie1]

Why would any purchaser not think the rent is way too high and smell a rat?

And what if you pay your tenant $10K and he skips?

I cannot see many people fooled into thinking your house is worth an extra $30K or more based on an inflated weekly rental amount.

The property is currently gettin $850 a week. Properties that rent for $1000 are selling for more than 30k-50k than a comprable of my style of property. I just want to bump it up to $1000. Its not as if this is a low end property getting $300 and I am trying to inflate by more than 50%.

 

[wylie]

But purchasers look at value of property and comparable sales, not what it is rented for. If it is worth more then why are you not charging more now. If not, why try to be dodgy?

That goes for cheap and expensive properties. People are not silly enough to fall for that, especially those looking for a house that rents for $1000 a week.

 

[Rooster]

Unfortunately people are dumb and silly enough to fall for something like this. People don't even scratch the surface with their research.

They look at the current yield and extrapolate from there.

Same as how many people have read their property management agreements.

Some things will never change.

Rooster

 

[westminster]

To dodgy for me to contemplate.

If your property is worth more in rent then ask for it from your next tenant. If it isn't, then it isn't.

When you go to sell it, it is your choice as to the price you put on it. You could try for $30-50k more and see if anyone bites.

If you did go through with this scheme you are going to have one unhappy buyer when he goes to renew the tenants lease in 12mths and your Tenant refuses to pay $1000 any more. I would think that he would consider a civil case against you. I most certainy would.

 

[jclegg]

As a buyer I would always research the area well enough to know that the rent is inflated. I would also ask the REA to provide me with comparisons for the area. It's not worth their reputation to lie for you.

So as said by the others, if it's worth $1000 compared to other properties in the area then you should be able to charge this already and justify it to the tenant with market comparisons. If it's not worth it maybe you would be better off spending the $10K improving it so that it is worth it?

 

[georgie1]

I should clarify, highest rental achievable is $850 for my property. Properties getting $1,000 per week are in better condition but not a better location.

Also the selling agent won't know, I won't tell him so there is no need for him to lie.

I would say its a small risk for me to pay. If i don't get the inflated price I want then I will continue to rent it for the year at a cost of $2,500 to me. If it sells at 30k-50k above market value to the investor then I think its $2,500 well spent.

There are no laws broken seeing as no one has pointed them out so I could not be sued.

 

[westminster]

Just because we haven't pointed out any laws doesn't make it legal!

I think it probably is fraud. You are misrepresenting the income possible to future investors.

Is it really worth is? For the 12mths you would have to declare rental income of $1000k per week to the ATO and pay tax on that - so it costs you twice.

I think it's morally wrong and illegal. Go spend $10k on making your property nicer if you want more rent and a better selling price.

 

[Rooster]

You are also then forcing the tenant to move out in 12 months time. He won't want continue to pay above the odds for a new owner when he knows what the market rent is.

Your idea is deceptive and lacks any social morals.

I'd be embarrassed to be you right now. The less people with standards like yours in the world, the better off it would be.

Rooster

 

[Robbo2621]

I just feel like its the wrong way to go about it, sounds pretty dodgy too me. I think You would be better off throwing your money at abit of a Reno to get your yield and selling price up Instead of paying off your Tennant. Poor buyer that is unfortunate enough to pick this property up.

 

[wylie]

I should clarify, highest rental achievable is $850 for my property. Properties getting $1,000 per week are in better condition but not a better location.

Also the selling agent won't know, I won't tell him so there is no need for him to lie.

I would say its a small risk for me to pay. If i don't get the inflated price I want then I will continue to rent it for the year at a cost of $2,500 to me. If it sells at 30k-50k above market value to the investor then I think its $2,500 well spent.

There are no laws broken seeing as no one has pointed them out so I could not be sued.

You are making some big assumptions in this quote above.

What sort of agent will not know how much rent you are getting? Of course, an agent will know what rent you are getting.

You "might" happen upon an unsuspecting buyer who has done no research who will pay you over the asking price but I'd guess it is because they don't know their values (purchase OR rental) and would have nothing to do with what rent your tenant is paying.

I've never, ever used the rent that a tenant is paying in my working out of what a property is worth. That seems to be how commercial property prices are worked out. A tenant buying a house to live in or to rent will have done their research.

 

[georgie1]

I should further clarify the agent will know its getting $1,000 a week they just won't be aware of the inflated rent.

I'm still yet to see any hard proof this is illegal. What about developers who offer rent guarantee's for one year when you buy their properties at inflated market prices??

You guys are clutching at straws. Was it moral for older generations to use tax payers money (negative gearing) to increase property prices way above their true value creating a younger generation of full time renters??

Play ball not the man. The rules are set in the law, if I am not breaking the law then blame the law makers.

 

[Rooster]

I should further clarify the agent will know its getting $1,000 a week they just won't be aware of the inflated rent.

I'm still yet to see any hard proof this is illegal. What about developers who offer rent guarantee's for one year when you buy their properties at inflated market prices??

You guys are clutching at straws. Was it moral for older generations to use tax payers money (negative gearing) to increase property prices way above their true value creating a younger generation of full time renters??

Play ball not the man. The rules are set in the law, if I am not breaking the law then blame the law makers.

Not the place to get proof it is illegal.

Stump up some coin, toddle off to your solicitors and ask them the question.

You're wasting your time here.

Rooster

 

[thatbum]

Play ball not the man. The rules are set in the law, if I am not breaking the law then blame the law makers.

Lawyer here. I can't think of anything criminal about it off the top of my head, but it's probably fraudulent misrepresentation in a contract law sense which means a buyer who found out could void the sale contract and/or claim damages.

 

[georgie1]

Lawyer here. I can't think of anything criminal about it off the top of my head, but it's probably fraudulent misrepresentation in a contract law sense which means a buyer who found out could void the sale contract and/or claim damages.

Well as we pointed out the rent has nothing to do with the contract. So there is not fraud contractually.

 

[wylie]

I should further clarify the agent will know its getting $1,000 a week they just won't be aware of the inflated rent.

Then he/she is not a good agent.

I'm still yet to see any hard proof this is illegal. What about developers who offer rent guarantee's for one year when you buy their properties at inflated market prices??

Many investors know that these rents are inflated.

You guys are clutching at straws. Was it moral for older generations to use tax payers money (negative gearing) to increase property prices way above their true value creating a younger generation of full time renters??

That sentence gives your game away .

 

[thatbum]

Well as we pointed out the rent has nothing to do with the contract. So there is not fraud contractually.

Uh, firstly, the rent has a lot to do with the contract, since its a contract of sale for property. That's not the reason why it isn't criminal.

Secondly, while it might not be fraud in a criminal sense, it is almost certainly a fraudulent misrepresentation of the rent being collected from the property - which as I mentioned, has some pretty serious civil repercussions if the buyer finds out and wants to make an issue of it. (Which for something like this, they probably will)

 

[Rooster]

Uh, firstly, the rent has a lot to do with the contract, since its a contract of sale for property. That's not the reason why it isn't criminal.

Secondly, while it might not be fraud in a criminal sense, it is almost certainly a fraudulent misrepresentation of the rent being collected from the property - which as I mentioned, has some pretty serious civil repercussions if the buyer finds out and wants to make an issue of it. (Which for something like this, they probably will)

You're wasting your time unfortunately. Ol Georgie porgie is only interested in posters who support his uneducated view on how to best rip off an unsuspecting buyer.

Precisely the reason he refuses to commission accurate legal advice which would give him a definitive answer on whether his underhanded tactics have merit or not.

Next....

Rooster