Can I Do This

[mrsdawnrazor]

I have found an IP that I want to buy. it is currently tenanted at $40 below market rate with no rent review until May 08. Can I buy it with vacant possessions and then re-let it at the higher rent or do I have to honor the current tenancy

Thanks
Mrs DR

 

[kingchevy]

You have an obligation to honour the current lease sorry mate

 

[mrsdawnrazor]

I guess I will have to drop my offer by $2k then to cover the shortfall. My only worry is if they want to stay, can I push the rent up at the end of the lease, as by then it could be a long way under market rents.

 

[alexlee]

I guess I will have to drop my offer by $2k then to cover the shortfall. My only worry is if they want to stay, can I push the rent up at the end of the lease, as by then it could be a long way under market rents.

At the end of the lease, you're free to raise the rent. If they don't want to pay that, they can just vacate. Just because they want to stay doesn't mean they can dictate rent at renewal.

Get a PM to deal with this for you.
Alex

 

[MarkB]

I guess I will have to drop my offer by $2k then to cover the shortfall.

Chances are you're buying this place with a mortgage, right? LVR perhaps 75% (could be higher or lower). 8% interest rates?

So (if that is the case) - you offer $2k less and you've saved yourself $620 ($120 pa in cashflow + $500) ($120 is the interest on the $1500 of that $2000 that you have borrowed [@75% LVR] & with an 8% interest rate).

To save your $2k, you'll need to offer $6541 less (based on my assumptions) - which is $1613 on your deposit saved + $387 in interest on $4838 that you didn't borrow.

Not wanting to be pedantic, but if it's cashflow you're concerned about then you'll need to learn the maths of IPs.

M

ps. How do you know it is under-rented?

 

[mrsdawnrazor]

Hi Pitt St

You are absolutely right. Sorry I was cold last night and the brain wasn't working.

I know it is under rented as there is nothing on the market now for under $240 per week and this lease was signed 12 months ago as a 2 year lease with no rent reviews. The last 2 rentals that came up were gone within 2 days at $240 per week for a 2 bedder on the same street. This one is a 3 bedder with new kitchen and bathroom. It is in Brisbane and the rentals have been going up by stupid amounts over the last months. I have also checked with 3 real estate agents as to the going rate and then take off $10 per week for a realistic figure.

 

[GoAnna!]

You won't have any vacancy or letting though with a sitting tenant.

What would one week's vacancy and a letting fee cost you? I also find that established tenant’s tend to ask for far less in terms of repairs than new tenants. It's something to do with just getting used to the quirks of a house I guess. I know if a tenant moved into my house they would have a long list of requests ! To replace the front of the oven that fell off years ago for one

The net money difference between old and new tenant on higher rent may work out less than you might think.

 

[VYBerlinaV8]

Interesting. I am settling an IP on Thursday that I called for with vacant possession. We are now re-leasing the property. The PM seemed to think this was no problem, and our solicitor said to just keep our mouths shut.

I hope we haven't inadvertantly done the wrong thing. The previous tenants were paying well below market rent.

 

[jasperjue]

Are you sure you can't raise rents during the lease by giving sixty days notice ?. I recollect that i have never waited for lease renewal time. The only thing i can recall is that it can't be in less than 6 months between rent reviews and the 60 days notice applies.

 

[TheCamel]

Hmm. I see a riotactor here


If you ask for vacant possession, if you get it, then you can increase the rent.
But there's no guarantees you can get vacant possession..