Raising rents? (a lurker no longer ..)

Discussion in 'Property Management' started by TerryG, 26th Aug, 2003.

  1. TerryG

    TerryG Member

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    G'day, my first post here. Been a lurker for ages - thanks for all the discussions - has been invaluable. Thanks also to the site owners for their excellent books ....
    Bought my first IP last year (mayfield, newcastle) and was wondering what the general consensus is on rent rises. I realise it's never cut&dried, depending on vacancy rates, tenant behaviour, etc.
    Is there a formula or percentage you follow for raising rents? Or do you just put them up when you feel it's due?
    Your thoughts appreciated.
    Apologies if this has been asked before ....
    Terry
     
  2. Simon

    Simon Living the Dream

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    Terry,

    There is no formula - it is all supply and demand.

    I would be inclined to time your current lease or next lease so that it expires in Jan - Feb. This is the peak demand time for Newcastle. There will be a scarcity of rental properties as students come back and search for homes.

    Don't try to up your rent in Dec when they are all breaking their leases.

    You need to do some market research. Check with a few PMs and get their opinions. Find out what you can do to increase the rent.

    There are also ways in this town to get higher than average rent by renting to students by the room or to corporate tenants such as ADI. The latter really needs to be inner city and fully furnished with nice stuff. The student idea requires 4-5 bedrooms and within a walk from the uni. I suspect that at Mayfield you have neither.

    All the best
     
  3. ger

    ger Member

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    Hi
    No formula really
    For me it depends on the tenant
    I go to the inspections and see
    if the tenants look after
    the property i tend NOT to increase rents as much
    I have a property at tyhe moment same tenant
    for last 14 Years BUT the rent
    is about 20% less than the current market rental
    in that area similar property
     
  4. Sunstone

    Sunstone Member

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    Dear Terry,

    A strategy that I use is to combine some cost effective improvements to the property at the same time I do the rent rise. That way the tenant in some small way feels that they are getting some value for the rental increase and also allows myself to extract a greater rent rise then I would otherwise have been able to achieve.

    Also increases the value of the property and makes it even more desirable for other tenants should the existing tenant decide to vacate at some point in time.

    Cheers,

    Sunstone.
     
  5. TerryG

    TerryG Member

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    Thanks for the excellent replies.
    Some interesting things to take into account there ....
    I like the idea of sweetening the deal with some minor improvements and timing the lease renewal for uni students.
    Thanks again
    Terry
     
  6. Gill Bates

    Gill Bates Member

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    Re

    I would be inclined to time your current lease or next lease so that it expires in Jan - Feb

    Yes I do this , but i make sure it is the later 1/2 of Jan, the 1st 1/2 is usually quite dead as a lot of people are still on holidays.
     
  7. abcdiamond

    abcdiamond Member

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    Is there any special procedure in raising a tenants rent?

    I assume a letter to the tenant in writing is sufficient (this is for a NSW Tenant)

    but does a new lease document need to be issued ?

    I am wondering about this due to the need to present lease documents to the bank when renegotiating loans. The original lease document only shows the original rent being paid.

    Any clarification on this would be appreciated.

    Thanks
     
  8. JoannaK

    JoannaK Member

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    Hi ABC,

    you need to give the tenant not less than 60 days notice in writing of the intended increase. If you plan to post the notice to them, you need to add an extra 4 to 5 working days for postage. Also a good idea to keep a record of when you posted it so you have proof of postage and if the tenant says they never received it, it can be refuted by you.

    If you hand deliver the notice you can not leave the notice in the letter box or under the door. You must give the notice to someone who ordinarily pays the rent, or someone who ordinarily lives on the property but must be over the age of 16. It's good practice if you're hand delivering to get the recipient to sign a duplicate copy of the notice to acknowledge receipt.

    When you present your documents to the bank, a copy of the notice along with a copy of the rental receipt/statement showing that you are receiving the increased rent should be sufficient.

    Hope this helps.
     
  9. Denkel

    Denkel Member

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    TerryG and Ger

    just a consideration from the other end of this issue. I recently decided NOT to buy a pair of units on the one site. The final tipping factor was that the current tenants had been in there for up to 14 years (coincidently!) and the owner had not increased the rent along market value lines. Thus the yield was well below what it should have been. And... they had just recently signed new leases!

    Those units are still on the market and the vendor still wants too much for them.

    To NOT increase the rent when you should because it is less stressful for you can come back to bite you in other areas apart from the immediate financial sacrifice.

    I know how difficult it can be to balance "shoulds..."against "what ifs..."
    The safest way I know is to ensure you have a good PM and trust their judgement when it comes to "curly ones". It has worked for me so far.

    Kel
     
  10. Mitzi

    Mitzi Member

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    Hi TerryG

    Some good advice given and one point I might mention in regard to raising rents - the bond. Really this should be increased in line with the rent. Some Property Managers are loath to do this but in Queensland (at least) there is a form - I think an RTA Form 7 which should be sent at the same time as the letter advising of the increase. If a tenant is long term quite often the bond is left way behind the "4 weeks rent formula" and if things go wrong (and I have seen this) there is precious little for the owner to have as compensation. Rents should be "optimum" rather than "maximum" as this usually attracts a better tenant who has many options because of good references.

    Cheers
    Mitzi