What's a reasonable amount to increase rent by?

[oneguy]

Hi all

Just wanted to see what you think about this

Renting out a 2 Br unit through a PM in northern Sydney
Lease due to expire end Dec
Good tenant, keeps place clean, pays on time.
Tenant wants to renew lease for another 12 months
PM suggests increasing rent from $490 pw to $505
I think $490 is pretty much on par with what is offered for comparable properties at the moment but also leaning towards PM who should have a better feel for this.
Demand in the area for rental accom is reasonable and Dec is not a good time to
look for tenants
No improvements done to proprty during this time. No known change to strata that I know of coming up

Do you think the increase is reasonable? Is $15 on a $490 increase excessive? Not sure what CPI is at the moment but suspect this may be above that.

What sort of percentage increase have you introduced recently or is that apples and oranges stuff?

Your thought appreciated.

 

[missgreeneyes]

I wanted a $15-20 increase.
PM suggested $10 but put forward $15 to the tenants.
Tenants bargained it down to $10, which I accepted.
I dare say for nth syd $15-20 is fine.

 

[aman]

$15 a week is a touch over 3% which is in line with the housing component of CPI over the last 12 months. That said, if the tenant doesn't go for it and you don't want to lose them I wouldn't be afraid to make it a clean $500.

 

[Lawry]

I always look at what similar properties in the area are being advertised for, and pitch it relative to market rent. It they are a good long term tenant, keep it a bit below what you might get on the open market. Your tenants are likely to do the same (look at alternatives) when faced with a rent increase, and as long as you are at a level at or below what they could pay elsewhere, the hassle and cost of moving will help them decide to renew the lease.

 

[westminster]

I don't know about your state but I think in some there will be a maximum % increase written into your Tenants contract. Or it could be CPI.
I think $10-20 is far for an annual increase when you are around the $500 mark if comparable properties are asking the same. If other properties aren't then your tenant could choose to move to another cheaper property.
I think most tenants would put up with a $10 increase rather than moving even if other properties are a bit cheaper.

 

[Scott No Mates]

Westminster, in NSW there is no limit to the amount or % you can increase a rent (if the tenant bucks up they can always take it to the tribunal or go elsewhere).

CPI Sydney (all groups) for the year to June was only 1.3%

Depending upon vacancy rates in the area a small increase may be warranted but tenants when facing an increase which will break the $X00 mark will often have greater resistance ie although it is only $10 increase they will look at it as trying to keep their rent below the $500 mark where as a new tenant probably wouldn't feel as bad paying over the money because their sub-$500 expectations have not been created on that property. I know someone who recently lost a tenant to the adjoining unit because it was identical other than the rent being $30 per week cheaper ($1500 buys alot of lifestyle for some people).

 

[matto_]

I try to keep in mind what comparables are like in the area, and keep pace with that.

You could get ahead of the market - however you would risk the tenants leaving (as they have as much access to this sort of information as you do).

 

[oneguy]

Yes. I was thinking $490 was comparable with other similar properties, which was why I was surprised to hear the PM suggest increasing it by $15

Will do a bit more research and see what sort of properties are available for $500pw.

Good point re cracking the $500 physiological mark.

Thanks all.

 

[Scott No Mates]

Just because the agent advises that you should increase the rent doesn't mean you have to - they are your agent and will act on your directions. If the market doesn't stack up, don't tinker with the balance.

 

[oneguy]

Yeh fair point. I just thought the PM had a better feel for what's a fair increase.