Rental increase

OK - I have asked tenants for $10 rental increase for 1 year lease. They have come back and asked me to consider $5 via PM.

IP is located in Carseldine, QLD.

My thinking is that $10 a week is less than pat of smokes ! Understand they are good tenants however in the $400+ range I would think an extra $10 would not break the bank. Particularly as we look down the barrel of further int rate rises.

Anyone else has any thoughts before I respond back to my PM.
 
The 'cigarette' argument I guess can work either way. Tenant to landlord and landlord to tenant.

What are there chances of the tenants moving? Whats the probable vacancy period to find someone else? What's the market rate?

Without knowing any of these, $5-10 seems, if the market supports it, neither here nor there and I would doubt the tenants would seriously consider moving. It would cost them at least $200+ to move if they are using removalists.

If you are feeling somewhat generous, how about considering a $5pw increase for months 1-6 months and then another increase from months 7-12 in the 12 months lease? Ends up with an effective $7.50 pw increase over the course of the year.
 
Good point on the cigarette argument.

Market seems pretty tight from internet search. In hindsight I should've asked for $20increase ... this way you settle on $10 and look like a nice caring landlord :eek:
 
I think they would not move for $10 a week, so six months at $5 and six months at $10 increase sounds a reasonable compromise.

Of course, you can stand firm and they will probably pay the extra $10, but if they move, you lose more than you gain.

This is always a hard one to decide.
 
I like Wylie's idea. It depends how compasionate you are and/or if you look at your properties like running a business.
The question then is how much compasion do you show your clients if they were to ask you to give them a 1% discount on their account for the next 12mths, considering they are a regular client and always pay their bills on time. There lies your answer.
 
I think they would not move for $10 a week, so six months at $5 and six months at $10 increase sounds a reasonable compromise.

Of course, you can stand firm and they will probably pay the extra $10, but if they move, you lose more than you gain.

This is always a hard one to decide.
I vote for this idea as well. Changeover costs take up a lot of '$5 extra per week' units.

Or even an idea of $10/wk increase effective immediately but a cash back offer from you in the form of $260 ($5/wk x 52) or some similar work around as the tenant feels like they are being listened to. I have had tenants move on me before in this exact situation some years ago, perhaps it was a case of being offended that the landlord wasn't giving any ground.

Main points as I see it are:

* Avoid changeover costs and wear and tear from moving, especially if they are good tenants.
* Get the rents up as much as possible so any valuations on the place will be improved and the place is not rented under value.
* Above two points > quibbling over a couple of coffees ($10) per week.
 
Hi there,

Wylie has my vote and I might add I have built in rental increases on multiple occasions.

Regards JO
 
Is the place above/below market rent atm?

Built-in increases sounds like the best approach - that way you are seen to be reasonable...and like others have pointed out, you don't want to risk them moving...though, them moving will likely cost both you and them more then $520!
 
Just say no.

If they call your bluff and give notice then you can drop it to the $5.

If you fold now then this will happen everytime you want to up the rent by a small increment.

Regular and realistic rent rises are how our IP's become positive cashflow eventually. Is what it is all about.
 
Something else

The other option for a win-win

What would they like (reasonable) fan in a bed room or bed rooms or say aircon (do the math - cost benefit) and the $10 rent increase.

You are getting $10 incr, plus depreciation on the house and a good selling point letting someone in.

Never be a hard nose....always listen....As you said they are good customers
 
Just say no.

If they call your bluff and give notice then you can drop it to the $5.

If you fold now then this will happen everytime you want to up the rent by a small increment.

Regular and realistic rent rises are how our IP's become positive cashflow eventually. Is what it is all about.

Do you really want to put them offside?? Why play hardball with what seems to be a good tenant?? They may reluctantly stay on and then not care for the place as well as previously...
 
I just want to point out that buzzlightyear actually suggested the $5 and then $10 increase, so I don't want to take the credit for suggesting it. I was agreeing with his idea and feel badly that I seem to have been given the credit for the idea.

I do think it is a good idea though, but as JoshyBoi said, it if is at or about market rent already, then a smaller increase will probably mean they don't look around. If $10 more means they are paying considerably more than market rent, they may well move.

Me, personally..... no way would I move, change my address on everything for a measly $5 a week, or even $10 a week, and I don't think I am unusual.

However, I always find it difficult to find out what "market rent" is. When we have a house going to be vacated, I check every house on re.com to try to find out what market rent is. However, as we all know, photos can trick the eye. We have just re-rented a house we were getting $495 a week for. For very personal reasons we just wanted it filled and kept it at $495 per week. We could have asked more, but just wanted it filled quickly so kept it at that, happily.

When I check re.com I find houses for $350 a week that look every bit as good and others for $550 that don't look any better.

It is not an exact science at all, and anybody who says $495 per week is the market rent for this house is only going to be hitting a ballpark figure and, like we do, waiting to see how many people look and reject it before deciding it is too high.
 
$5 increase on a property rented in the $400s per week. Even if it is $400 is it 1.25% increase.

It's always good to talk in percentages and tell the tenant that all you are asking is 2.5% (equates to $10pw) increase in rent. When inflation is normally between 3-4% all you are doing is keeping up with inflation.

Cheers,
Oracle.
 
In hindsight I should've asked for $20increase ... this way you settle on $10 and look like a nice caring landlord :eek:

Don't put too much thought into it. When the 6/12 month anniversary comes around, the rent increases to the current going market rate. If they don't like it, off they go.

All you need to take into account is current market rate and possibly vacancy rate. So don't increase $5, $10, or $15 - go to whatever the current market rate is - so if that's $20-30pw, then why are you even considering $5-10? :)

*edit - a little birdie has told me I'm coming off a bit grumpy today*
 
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This entire thread is discussing whether you may miss out on $ 260.00 ??

You know that is not what this thread is about.

I agree that if market has risen by $20, then ask for $20 more. If market has not risen, maybe ask for $5 or $10 as most tenants will not move for that size increase.

What is at risk, is that depending on what market rates are, what rent has been paid to date (we don't know these figures in this case) then there is a possibility that the tenant will leave, which will cost probably two weeks of lost rent plus one or two weeks' worth of re-let fees.

It IS a risk, but one which needs to be addressed, and a decision made. If the tenant leaves it can cost a whole lot more than $260, as you well know.

The figures may not impress you, but for those who rely on the rent coming in, it can mean a week on baked beans. I'm sure you remember those times.
 
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