agreed to renew the lease for another 12 months at the same rent of $270 PW + water usage charges.
we could get $15 per week rent extra ($760 PA).
The tenants actually got the very next door house for $250 PW. a PM had done the appraisal for $235 rent.
I am confused. First you say the rent is $270, but market rent should be $285, then in your next post you say the house next door is $250 and a PM said your place was worth $235.
Bearing this in mind, it appears that you don't really know the value of your own property. Or, there is a glut of properties on the market at the moment and rents are reducing to get tenants signed up.
We never stay under market rate by choice and increase all rentals at every opportunity including at the 6 month mark if rents have continued to rise.
So yes, always increase rents to market rate and haven't had tenants leave due to a price rise yet. And if they did, don't really care - my PM's will find another one. To me a 'good' tenant is one that pays market rate, not $20pw under.
Here's some food for thought - sacrificing $15-20pw (or much more in some cases) which so many self managing LL's do to 'keep good tenants' would cover the cost of a PM and having no interaction with tenants yourself. We've seen many 'good' tenants over the years leave to be replaced by new 'good' tenants, so to live in fear of that 'bad' tenant is counter productive and costing you money.
Steve, this is exactly the way we operate. Keep rents at market, sometimes slightly above. There are costs involved in moving and a tenant will not move just because the rent is at market value unless there is some other underlying reason. Moving is time consuming and damn inconvenient too. If they like the place they will stay.
You do yourself a huge disservice by keeping rents low. Consider if you have 10 properties, if you like. All rented @ $15pw below market. So, that annual figure of $760 in lost rent now looks like $7600. Even if that figure is inconsequential to you, it might make all the difference in the world to the bank who is looking at your serviceability for the next acquisition.
Also, your tenants get used to having that extra money each week. When they eventually do move, they will have a rude awakening as to what the real market value of properties is. I have noticed some self-managing landlords with rents well below $15pw under market. This is because it is just easier to roll the tenancy over, year after year and not make waves. The first renewal might be $15 under, then the next it creeps to $25, the year after that $40.
Now, that good tenant, who has been on such low rents gets a divorce/new boyfriend or some other unforseen event happens. Suddenly that good tenant turns bad (it happens) and you have to evict them.
You also discover the reason they haven't called you out for maintenance/repairs is not because of the good order they have kept the place in at all. It is because they are lazy and can't be bothered. There are heaps of jobs that need doing, some general wear and tear, while others are damage.
You apply for the Bond, but it only covers 3 weeks rent, not 4. You don't have landlord insurance because they were good tenants, so there was no need, and you were slow at issuing all the notices, because they have always been good and you wanted to give them the benefit of the doubt.
By this time you are not only out of pocket the $40pw, you also have the repairs that need to be done as well as the large amount of time where no rent has been paid, while you have been jumping through the legal hoops to rid yourself of these tenants.