Low Rent increase suggested by agent

[ulvit]

Hi Gang,

I face a little bit of a decision.
I received notice from my agent suggesting i increase the rent by 2% for the next yearly lease period.
This is currently the first year I have had an investment property, and without having experience from having other tenants, I am really happy with these ones.
They have advised that they want to stay on another year, however the rent increase will always be an issue for any tenant.

I would like to keep them on, however not sure how to approach this.

Firstly, my property has increased by 13% since i bought it - Melbourne prices are crazy- so I think if i do increase, it is worth alot more than 2%
Do people increase their rent every year, or do they keep it low to keep good tenants?

 

[Perp]

Do people increase their rent every year, or do they keep it low to keep good tenants?

There's no rule other than you follow the market. If the market - and in reality, the relevant "market" is actually many markets, e.g. the rental market for 2 BR units in suburb A may be completely different to houses in adjacent suburb B - only justifies 2%, then you only increase 2%. If it justifies more, then you charge more.

 

[Salvatore1]

Unsure what the market for rentals is doing in Melb but in my area of Sydney home sale prices have increased by 17.7% in the past 12 months and rents have not moved at all. This is due to good tenants now buying (cheap interest) and new investers buying and increase rental pool. If it is a good tenant and you are afraid of losing them then leave them alone. After saying that inflation is running at 3% so you are not even asking for inflation plus tenants dont normally move if it is a $10-$15 per week increase.

 

[Macca]

DD required ! I assume you did some research before you bought the property, you should have compared this property with others in the suburb before purchase, now do the same with your rent.

If you have tenants that are "good" then it would be normal to treat them gently with rent increases, if you lose them you could have a vacancy and then end up with a tenant not as good as these.

To me, it is all a balancing act

 

[ulvit]

Yer, looked at the area at this current stage and rent for similar properties have increased by around 2% of what i am paying.

I have too noticed that rent prices for the same area go down during the year and back up around Christmas period - So not to sure how this looks for the scheme of things.
My lease renews in Jan.

I do want to keep them on and take note that loosing tenants will cost me more than the increase in vacancy

 

[yorkiefish]

increase it by 5% and see if they baulk, if not drop it down a bit. there not going to just leave fora small increase. the cost of moving is not very ccheap nowadays and hassle factor.
see how you go.

i'd also ask them if there's anything they need and see if you can supply that and justify the increase.....

yorkie

 

[neK]

If you've ever moved house before, work out how much it costs then divide that figure by 52.

Compare that increased amount to market rent and see how you compare.

I increase mine by $10 usually, tenants are usually ok because it a tad below market and it will cost them more to hire a truck to move.

(I only apply this to good tenants, bad tenants get a much larger increase to incentivise them to move out).

 

[Sez]

remember, the value of your property for resale is very different to the rental value of your property. Depending on what area of Melbourne your property is in will depend on what the increase is worth. In my area I have some landlords who haven't had an increase in a couple of years because it was rented on the high end of the rental value just before the rental market crashed and it's only just building back up. Some properties are worth a $5 increase and some a $10 increase. We review our rents 6 monthly with the inspections and have noticed that lately a lot of the rents that we're recommending an increase on are the properties where landlords haven't wanted to increase the rent because of good tenants .

So in answer to your question about how much and how often, your local market will have to dictate that but if you have a good PM then follow their advice, they should know the rental market, your tenants, your property, what else is available in the area and their advice should reflect all of that . A quick search on re.com will also point you in the right direction as far as the rental value goes .