I have notified rental agency that I don't want to renew a fixed term lease with our tenant. We want it to be a periodic lease as we are putting the property on the market. The tenant has come back saying yes okay with them and they want to pay $10 more in rent to secure their tenancy. That got me thinking why don't I increase the rent another $10/wk which would go down better with buyers and offer the tenants $50 for every open house we have. Is there anything underhanded or unethical about this approach?
Increasing rent to sell property
- Thread starter belleran
- Start date
I am interested in this response as I am thinking of selling at least one of my tenanted properties in the next year. I was worried tenants might decide to leave immediately and get a new renter so they have continuity of renting but I would be left without rent for the time it takes to sell. Would it seem tenants would rather hang on in the hope the new owner wants to rent it as well
Wylie the tenants will be on a periodic lease so they will only need two months notice.
I think the tenants response to a property being for sale does vary depending very much on their circumtances and the proerty market at the time. It is a pain for people to have to move so tenants do think twice about it.
The point of my question however is whether what I am proposing is okay. Maybe I should have posted in the buying/selling thread.
I think the tenants response to a property being for sale does vary depending very much on their circumtances and the proerty market at the time. It is a pain for people to have to move so tenants do think twice about it.
The point of my question however is whether what I am proposing is okay. Maybe I should have posted in the buying/selling thread.
I have heard of a property investor who would raise his tennants rent by $50 per week and enter into a verbal aggreement with them to refund this amount in full when the property was sold, purely for the purpose of inflating the rent return to unsuspecting potential buyers, extremely unethical behaviour!
It is sure a lesson in due dilligence for buyers to always make sure they know what the market rent is, there are plenty of dodgy people out there!
It is sure a lesson in due dilligence for buyers to always make sure they know what the market rent is, there are plenty of dodgy people out there!
Inflating the rent to look good when selling a propert as an investment may be unethical, but it doesn't stop an agent at an empty home open from picking a number from nowhere and adding 20% when you ask them what the expected market rent would be. 
As always buyer beware and do our own research.
As always buyer beware and do our own research.
Inflating the rent to look good when selling a propert as an investment may be unethical, but it doesn't stop an agent at an empty home open from picking a number from nowhere and adding 20% when you ask them what the expected market rent would be.
As always buyer beware and do our own research.
.....hence why asking an agent a question is absolute waste of time, unless of course you have already done your homework like the ATO does, and simply ask question to double check whether the responder is telling the truth of not.....but then where will that get you. So, they lied. Big deal. Go back to the paperwork and study to get the real picture.
You're buying the property. The Seller and agent will be long gone after settlement. Concentrate on what will be left after settlement.
Simply gather the signed paperwork - they are the same as with all properties, and go thru it with a fine tooth comb.
Trouble is, most people are slack, go the easy route by simply asking the agent and then crossing their fingers and hoping for the best, hoping that what they said was the gospel truth. Are people really that trusting with the biggest purchase of their life. When the truth comes out, for some reason they get all antsy and hysterical if the picture doesn't fit with what the agent painted for them.
Ignore the agent, ignore the seller, and simply study the paperwork.
If your property is being marketed to the investment market, then yes the increase current rent may 'trick' buyers into paying more (by increasing the perceived yield of the property). Like Dazz said, if they do their homework they will see straight through it, but some will not do their homework.
Is it ethical??.. No, I don't think inflating rent to raise your selling price is ethical. Unless you are raising it to a point which would be considered market value.
In saying this, some owners in Commercial offer rent free periods, cash incentives at beginning of lease, construct fit out for tenant, hardstand additional yard area for them, improve building, add power etc etc to boost the rental up, which looks better to the owners' banks and any potential buyers in the case that they sell. Again, buyers should do their research to discern whether the tenants are paying current market rates, but if they don't, then this can be a trap.
I recommend regular market reviews though in any case. There are plenty of owners out there with rents significantly below market rent due to bad management or laziness. One of my clients just sold a 3bdr house on 5 acres near Penrith for $800k. Not sure what market rent is ($600-800/wk?), but his nephew had leased it for the last 15 years for $100/week Luckily my client has enough property in his portfolio that this didn't bother him in the slightest
Is it ethical??.. No, I don't think inflating rent to raise your selling price is ethical. Unless you are raising it to a point which would be considered market value.
In saying this, some owners in Commercial offer rent free periods, cash incentives at beginning of lease, construct fit out for tenant, hardstand additional yard area for them, improve building, add power etc etc to boost the rental up, which looks better to the owners' banks and any potential buyers in the case that they sell. Again, buyers should do their research to discern whether the tenants are paying current market rates, but if they don't, then this can be a trap.
I recommend regular market reviews though in any case. There are plenty of owners out there with rents significantly below market rent due to bad management or laziness. One of my clients just sold a 3bdr house on 5 acres near Penrith for $800k. Not sure what market rent is ($600-800/wk?), but his nephew had leased it for the last 15 years for $100/week
Luckily my client has enough property in his portfolio that this didn't bother him in the slightest 
There are a couple of these I have spotted in recent hunts... properties rented for way above market rent, with rental agreements which started very close to the sale listing date and with a 3-6 month lease term with no corresponding "for rent" listing on web portals you would normally see on an address search.
Houses look very tidy (almost designer) although in lower socioeconomic areas, and no matter what time of the day you ask to go through the tenants are never there.
Smells suspiciously like phantom tenancies to sucker in investors, then after a few months the "tenant" gives notice and you are stuck with a property that will rent far below rent at time of purchase.
Interesting that the ones I have seen like this are both from the same selling agent too..
The property reports we give clients have all sorts of factors which contribute to the estimated value of a property. The number of bedrooms, bathrooms, car parking and how well it compares to the rest of the street are all factors.
Rental income doesn't appear anywhere in the report at all, other than to state the average rent for the area. I also tell clients not to rely on the selling agents advice for the potential rent of a property as they'll always inflate it to make the property more attractive to investors.
Finally, keep in mind that only about 30% of properties in the market are rentals and very few investors are actually serious about it an own more than one. Most potential buyers are unlikely to give a damn about what the rent is, most would rather buy with vacant possession.
Rental income doesn't appear anywhere in the report at all, other than to state the average rent for the area. I also tell clients not to rely on the selling agents advice for the potential rent of a property as they'll always inflate it to make the property more attractive to investors.
Finally, keep in mind that only about 30% of properties in the market are rentals and very few investors are actually serious about it an own more than one. Most potential buyers are unlikely to give a damn about what the rent is, most would rather buy with vacant possession.
