How to increase rent to current market value?

My previous PPR has been an IP for 5 or so years now. At the time I moved out, it was a renters market and so the agents weren't keeping a close eye on increasing the rent and as it was my first IP, I guess I thought that the PM knows best and I just wanted a tenant (if I only knew back then...).

Anyway, have had the same tenant in there for a while now and until the last 12 months have had to push to have rental increases made. Before then, the tenants would then push back to only have $5 increase rather than $10. In the past 12 months, the PM has been suggesting rent increases of $15 per week. So the rent has increased by $30per week in that time.

Rentals have gone nuts in that area in the past 12 months and due to the earlier lax attitude of the PM and my naive reliance on the PM to keep with the rents, we are now a long way behind on market rent. We don't tend to hear from the tenants much these days re repairs and I think they are aware that they are in a good position with low rent and don't want to ask for too much.

There are some high cost items that need to be replaced (air con, motor for garage door) and we'd like to inspect the place to get it back in good nick as we expect there would be other things that need updating replacing too. We'd also like to see what we can do to get the property back up to market rent. Apart from the air con, the tenants haven't asked us to repair anything else so we are going to do the air con regardless.

I'm aware that a tenant can object to a large increase in rent. Should we just hit them with a big increase and hope they decide to move out, do we tell them we are going to do the repairs then increase the rent, or do we somehow find a way to end their tenancy and then fix the place up and put the place back on for rent at a much higher price? Or do we just have to suck it up and accept the fact that we didn't push hard enough a few years back and have to wait until the tenants leave on their own accord (which we assume they won't any time soon)? FYI, it is a 3 bed townhouse in Guildford, rent has just increased to $325 per week which I believe is at least $50 under standard rental round there.
 
My previous PPR has been an IP for 5 or so years now. At the time I moved out, it was a renters market and so the agents weren't keeping a close eye on increasing the rent and as it was my first IP, I guess I thought that the PM knows best and I just wanted a tenant (if I only knew back then...).

Anyway, have had the same tenant in there for a while now and until the last 12 months have had to push to have rental increases made. Before then, the tenants would then push back to only have $5 increase rather than $10. In the past 12 months, the PM has been suggesting rent increases of $15 per week. So the rent has increased by $30per week in that time.

Rentals have gone nuts in that area in the past 12 months and due to the earlier lax attitude of the PM and my naive reliance on the PM to keep with the rents, we are now a long way behind on market rent. We don't tend to hear from the tenants much these days re repairs and I think they are aware that they are in a good position with low rent and don't want to ask for too much.

There are some high cost items that need to be replaced (air con, motor for garage door) and we'd like to inspect the place to get it back in good nick as we expect there would be other things that need updating replacing too. We'd also like to see what we can do to get the property back up to market rent. Apart from the air con, the tenants haven't asked us to repair anything else so we are going to do the air con regardless.

I'm aware that a tenant can object to a large increase in rent. Should we just hit them with a big increase and hope they decide to move out, do we tell them we are going to do the repairs then increase the rent, or do we somehow find a way to end their tenancy and then fix the place up and put the place back on for rent at a much higher price? Or do we just have to suck it up and accept the fact that we didn't push hard enough a few years back and have to wait until the tenants leave on their own accord (which we assume they won't any time soon)? FYI, it is a 3 bed townhouse in Guildford, rent has just increased to $325 per week which I believe is at least $50 under standard rental round there.

Hi beachgurl, if the rental market is strong, I would go ahead and make all the necessary upgrades (regardless of whether the tenant has asked for it) and then push the rent up to the rightful market level. This move is justifiable because the tenant is getting the new upgrades. If tenant is not happy, in a strong rental market, someone else would be, and that someone will become your new tenant and will probably appreciate the new upgrades even more and more importantly, willing to pay for it and dont see it as a significant rent increase. I recently upgraded the kitchen equipment, toilets, tapware and lighting to one of my apartments (some items were due to be changed anyway) and I increased the rent from $490 to $560 and current tenants are very happy.
 
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Based on your view that some things need replacing/upgrading I would think you have nothing to loose by increasing rent by $30-40 at the next review.

The tenants will either pay it or move out. If they pay they may request some repairs which you would already be covering. If they leave you can attend to the repairs and then ask the full market rent.

If they are on an expired lease then another way of achieving current rent within 60 days is to evict current tenants (no reason), do the fix and relist at current rent.

We have been increasing rents at 10% every 6 months over the last year on most of our properties with only moderate squeals. At some point we are going to reach the break point but until then will continue with the increases.

Cheers
 
Hi beachgurl

I reckon that a two year tenancy is about the optimal term - we have a tenant who we know has been looking to buy (they asked twice if we would consider selling) and the Property Manager contacted us last week suggesting a $20 per week increase and if the property would be avilable for rent after the effluxion of the current lease.

She also said that the tenants may not want a new lease due to looking to buy.

We were pleased with the idea of $20 per week, which would have taken the rent to $510 per week.

However, the tenants have now given notice and the PM has suggested advertising at $550 per week. She is confident we could achieve this with a new twelve month lease.

Even taking into account the letting fee, this would be $3,000 per year more than the current rent.

When we have a tenant for 'too long' we all become complacent, and feel mean about imposing increases on them. A new tenant, fresh from the market, comes in at market rent.

Yes, we face the prospect of a vacancy, and letting fees, and probably a bit of maintenance or a freshen up, but overall we are usually better off with a change.

Your tenants can be given the required period of notice that as from this date the rent will be $375 per week.

Don't get involved with justifying the increase. Look at it as an adjustment to market. If they complain, let them take it to the Tribunal. If they leave, you will find another tenant soon.

Don't apologise and don't make an issue of doing the repairs.

Just attend to the rent and the rest will look after itself

Cheers
Kristine
 
Hi Kristine

Great use of the word effluxion, only ever seen it used before as effluence in relation to
plumbing and the outflow of liquids.

Listed 1 word before effluent in the Collins dictionary.

Cheers

Pete:)
 
Yes, Pete

Time 'effluxes'

I always found it to be a rather strange term but apparently that is what time does.

Bit like the tynes of a fork.

Most people say 'prongs' but the spiky bits are, in fact, tynes.

So effluxion is not effleunce and it is not a plumbing phrase or term.

I first came across this reference when on the Estimates Committee for Shire of Lilydale while we were reviewing various leases

Cheers
Kristine
 
Yes, Pete

Time 'effluxes'

I always found it to be a rather strange term but apparently that is what time does.

Bit like the tynes of a fork.

Most people say 'prongs' but the spiky bits are, in fact, tynes.

So effluxion is not effleunce and it is not a plumbing phrase or term.

I first came across this reference when on the Estimates Committee for Shire of Lilydale while we were reviewing various leases

Cheers
Kristine

Just to help you out Kristine the 'prongy' things are tines not tynes.

Efflux is effleunce, alternative ways of spelling the same word.

Effluence or efflux was used in plumbing when referring to the outflow of liquids. Was never a phrase or term just a word.

So close Kristine but no kewpie doll.:cool::cool:

Cheers

Pete
 
Beachgurl,

Just remember what you are in it for......You are not providing a charity for anyone.

I understand that a happy, long term tenant is equivalent to a pot of gold in renting a place out, (I know, as I have just evicted, and gone through small claims tribunal, to get bad tenants out of one of my props) but that is provided they are paying current market rents. I am with Kristine. It is a business, and you have to put your business glassess on when looking at this scenario.

With regards to increase in rent, the tenants can argue and take you to court if rents rise to steeply, (this is what I have been informed, but may need further investigation) but your scenario wouldn't stand up in court, because you only want it to be raised to current market rent status.

If they don't like it, give them 60 days to get out, and get your property manager working for you and looking for another tenant.

I am in process of informing my tenants of a rental increase and the agents are about to give them the 60 day notice.

My thoughts only.:)

Cheers,
 
G'day,

Say the current tennants leave when you put the rent up by $50. If you factor in the agent's "letting fee" and a minimum of 1 week's rent for tennant changeover, you're going to be down $650, which you will make up in 3 months if you get the full $50 a week increase. If you are convinced that there are tennants ready to go at that rent amount, then it sounds like a good deal.

If you were considering putting the rent up by $10 per week, you'd need over a year at the new rent to essentially break even. The story only gets worse if there isn't much demand and you have weeks between tennants.

MK
 
Hi beachgurl,

Do your research and make sure that the rent you raise it to is market rent for the suburb. If the tenant complains, point them to sites like suburbview.com where they can look at the entire suburb and see for themselves that your rent is fair, and that they're free to move. Chances are, they'll stay because it's a pain to move, and they won't be able to rent anywhere else for much cheaper. Alternatively they could move to a cheaper suburb. :)

You're in the business of investing; run it like a business.
 
Hi Kristine

Great use of the word effluxion, only ever seen it used before as effluence in relation to
plumbing and the outflow of liquids.


Well done Kristine. We have the word littered throughout our Leases. It is correct.


I suppose because he's never seen the word used before w.r.t. Leasing, I guess that makes it - what - not right ??


So close Kristine but no kewpie doll. :cool::cool:

Staggeringly poor form to an intelligent lady who has used the correct form of a 'grown up' word. You should be thoroughly ashamed of yourself.
 
Well done Kristine. We have the word littered throughout our Leases. It is correct.


I suppose because he's never seen the word used before w.r.t. Leasing, I guess that makes it - what - not right ??


Hi TPFKAD

If you read my 1st post you will see that I have complimented Kristine on
use of effluxion.

Which bit of "Great use of the word effluxion" don't you understand?

Staggeringly poor form to an intelligent lady who has used the correct form of a 'grown up' word. You should be thoroughly ashamed of yourself.



Again TPFKAD

I was replying to Kristines post to me stating that

"Most people say 'prongs' but the spiky bits are, in fact, tynes"

"So effluxion is not effleunce and it is not a plumbing phrase or term"

To me tynes are tines.

and

Effluxion and effleunce are different spellings of the same word.

The "close but no kewpie doll" was awarded for the above and absolutely nothing to do with the use of effluxion.

Perhaps you should read the posts closer and keep them in chronological
order.

Then again are you saying that there is a pecking order here and it is ok for
some to correct the spelling and use of words but not others?

There's a kewpie doll on the way to you TPFKAD.:)

Cheers

Pete
 
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