Six month period to increase rent

[willfong]

We settled on our first IP on 31st Jan and agreed to let the existing tenants stayed on at the old rental price on periodic basis. The current rental is extremely cheap for 3br in the area but we didn't want to risk the property being vacant at settlement as cashflow was very tight then. We figure six months is a fair gap between that agreement and a rental increase and apparently there is a law that says we can only increase the rent once every six month anyway.

Does the 6 months rule mean I can give them notice to increase rent in June and have it in effect in August or does it mean I can only give them the notice in August? This is in Victoria.

We are self managing so we save on agent fees and the tenants have been very good. There are only two of them (DINK) in a 3br property so the wear and tear is minimal, and they take very good care of the property (which is a big point for us as we plan to turn it into our PPOR in a year or two, so we are quite attached the property emotionally), always pay rent on time, and don't bother us with repairs.

Given the above situation would you give a rental discount for them and how much discount do you think is appropriate? Market rent for the property in question should be around $400/week now and they are currently paying $335/week. I am thinking of increasing it to $365/week.

 

[Fizzy]

You can serve the rent increase notice now. The legislation does state that you may only increase the rent every six months. You may give rent increase notices within 4 months as long as the actual date of when the increase takes effect falls on the six month anniversary date.

The rent increase you are proposing is fair and reasonable bearing in mind that if the tenant believes it is too high they can apply to Consumer affairs to have it valued which in some cases can result in less rent than you proposed. I guess it just comes down to the balance. You are not a charity and your property needs to work for you as much as is possible, but if you are as happy wit the tenants as you say it would be great to keep them

Good luck

 

[Bazza]

We are about to re-lease one of our IP's and I was thinking of a 6 month lease this time so that I could increase the rent if interest rates keep rising.

Unfortunately, a 6 month lease would expire just before Christmas which is not a good time to be looking for new tenants.

What sort of clause should I put in a 12 month lease to increase the rent in six months due to interest rate rises?

Cheers,

Bazza

 

[LynnH]

Bazza

Why don't you just go for a seven month lease???

Cheers
LynnH

 

[Bazza]

Thanks LynnH - didn't think of that. But, it would still be right on top of Christmas. We will probably start the new lease around the 1st June depending on when the current tenant vacates so maybe an 8 month lease would be the go?

Cheers,

Bazza

 

[LynnH]

Way to go, Bazza!

Cheers
Lynn

 

[buzzlightyear]

We are about to re-lease one of our IP's and I was thinking of a 6 month lease this time so that I could increase the rent if interest rates keep rising.

Unfortunately, a 6 month lease would expire just before Christmas which is not a good time to be looking for new tenants.

What sort of clause should I put in a 12 month lease to increase the rent in six months due to interest rate rises?

Cheers,

Bazza

Thanks LynnH - didn't think of that. But, it would still be right on top of Christmas. We will probably start the new lease around the 1st June depending on when the current tenant vacates so maybe an 8 month lease would be the go?

Cheers,

Bazza

Bazza, you could go for a 12 month lease, with a rental increase at the start of month 7. I have done that. The rent coming out of the previous lease was $400pw, it was increased to $420pw at the start of the new lease, with an increase to $450 from the start of month 7 (August). In hindsight they have the better deal, rents are now at $470pw!! But then again, I didn't think the increases that I have seen were going to continue at the rate that they have.

As for your comment re interest rate rises, as long as the market can bear the increase, no need to worry about what interest rates are doing. Would you reduce the rent if interest rates started to fall?

 

[Fizzy]

Bazza the easiest way around it is to put a clause in your lease as follows: The LANDLORD may at any time during your tenancies agreement increase the rent by giving to the TENANT at least sixty (60) days notice of the increase. The landlord cannot increase your rent more often than once every 6 monhts.

By doing it this way you are working within the legislation but not restricting yourself by mucking around with different length leases.

 

[Bazza]

Thanks Guys.

Fizzy, that is what I am looking for - a clause that leaves the options open.

Cheers,

Bazza