Will you be increasing rents?
- Thread starter Prakman
- Start date
I'll wait and see what my PM suggests in March (fixed lease until July) and decide then.
Although at the moment, I think it's a tad overpriced, and i'd be inclined to not just do the 10% because I can. Maybe 10 or 15$... (5% orso)
But I'll do something at the same time.. a tastic in the bathroom possibly
Although at the moment, I think it's a tad overpriced, and i'd be inclined to not just do the 10% because I can. Maybe 10 or 15$... (5% orso)
But I'll do something at the same time.. a tastic in the bathroom possibly
I take it when its there.
Supply and demand is the bottom line but look also at the bigger picture. In this economic climate interest rates are going up because the economy is booming. If the economy is booming then well located house prices are also on the rise. The rental income is part of the sustainability of the investment. Take the money when it is offered. This is a great time to have a vacant property in Sydney. one example I have is a 1 bedroom unit just relet for 350pw, six months ago I was getting 295pw.
It is all just part of the game. The interest rate rises are their own monster and as investors it is more important to focus on how these rises impact on our strategies.
Another way to slow our boomong economy is to raise GST(very unpopular maybe, but it would work better than any amount of interest rate rises)At least the government get the money and not some banker or their share holder who may not even be Australian).
Simon
Supply and demand is the bottom line but look also at the bigger picture. In this economic climate interest rates are going up because the economy is booming. If the economy is booming then well located house prices are also on the rise. The rental income is part of the sustainability of the investment. Take the money when it is offered. This is a great time to have a vacant property in Sydney. one example I have is a 1 bedroom unit just relet for 350pw, six months ago I was getting 295pw.
It is all just part of the game. The interest rate rises are their own monster and as investors it is more important to focus on how these rises impact on our strategies.
Another way to slow our boomong economy is to raise GST(very unpopular maybe, but it would work better than any amount of interest rate rises)At least the government get the money and not some banker or their share holder who may not even be Australian).
Simon
Sure have....my unit prices are market driven and I try to keep with the median price for the area. One tenant who's been there for 10 years is a bit behind the going price. Not unhappy with that.
Couldn't agree more.
I've just moved out of my PPOR unit and it will be advertised at whatever the market will bear. This is a business after all.
The only problem is, themindset of tenants dont think in % terms. They look at $ amounts. So lets say I have a $500K investment property renting at $500pw. If Iwere to slap on $50 pw to the existing tenant, they arent gonna be happy. Lets assume adding $50 ($550) is slightly above market or at market. Whether tenants pay $200pw or $500 pw, they seem to always expect increases to be in $5-$20 increments before its considered 'excessive'.
I think that's a difficult thing to say when you have very good tenants.....getting new tenants means reletting/advertising fees that may be well worth it if the rental increase is enough and your new tenants are excellent, but you never know what you will get (even with the best rental checks) ........and if you have excellent tenants to begin with, I think increasing the rent slowly may be beneficial for everyone. I believe fantastic tenants are worth keeping.
I absolutely agree with this (as we're tenants ourselves). We will be moving out with the next rent increase (if it's within the year since we signed the lease like the agent is letting on) - we're already paying higher than average I believe, and we're tenants from heaven - direct deposit of full rental balance one month in advance 3 days before due date every month.....I report maintenance issues just because it's a new house and they can get it fixed under the warranty but we could care less if it happens......it's more for their awareness (note - never live in a brand new house!!).
But we'll happily downsize to a smaller place, less rent........the owner will have to make that judgement whether it's worth it or not.........
The max we've ever increased rent on our own IP's is $10 per week and never had an issue (under 5%) - I think fairness is crucial to the tenants (if they're good ones!!).
Friends of mine who are also renters always balk once a rental increase is higher than 5%......time to move on they always say........
On a different note....does anyone know the legalities in Victoria of rental increases?? - The best I can find is fairness is equal to market rate - so does that mean that if a property is underlet by 30% you can apply a 30% increase in rent? (legally)?
Thanks,
Jen
in nsw rent can be increased every 6 months - regardless of whether they are on lease or not ... so ... in the current newcastle market (vacancy around 1%) i'd rather raise $5-10 every 6 months (as market allows) than leave til the end of a 12 month lease and raise it $20 in one hit.
not sure about victoria.
not sure about victoria.
Good point...and we can certainly relate to that for our residential stock, and it's one of the major planks in our decision not go down that path anymore.
We had one house on exactly $ 500 p.w., and I increased the rent in the second year by 4% up to $ 520 p.w. The tenant whined and carried on like her throat had just been cut. Being vindicative, she then wrote my wife an email complaining about stuff that needing fixing "urgently", seeing as though she was now paying absolute top dollar for the house. She pays about 2.3% gross yield, but in her mind that's absolutely top dollar. Of course, being bound by the ridiculously one-sided legislation known as the RTA, we had no choice in the matter and had to oblige, which cost us more than quadruple what the annual rent increase was. It simply confirmed my belief that the cashbox was a dud.
As a comparison, we just re-let our scabby truck yard after the previous tenant went broke. He was paying $ 1,600 p.w. plus GST plus all outgoings, another $ 211 p.w. The new guy just went in and he is signed up for $ 2,850 p.w. plus GST plus all outgoings. We are not bound by the RTA legislation with this one, so he needs to do all the repairs, so we know we won't have any whingy phone calls that end up costing us alot of cash.
We're happy with that, as the 106% mortgage we took out 2 years ago to buy the place only costs us $ 1,125 p.w. The excess cashflow of course doesn't end up in our pocket, it needs to be channelled back into the loss making houses to keep our residential tenants in the manner to which they have become accustomed. If it wasn't for this external cashflow support, the houses would have been dumped years ago.
Jen, these are the legalities (although you may have seen this).
http://www.austlii.edu.au/au/legis/vic/consol_act/rta1997207/s47.html
I am going through the same scenario at the moment. Current rent is $400pw, and market rent has jumped to $440-$450pw. I have struggled with how much of an increase. If the property became vacant, then I could ask for $440pw, however feel a $40 increase is too steep, especially in one hit.
In the end, I have gone for $420, and I will increase the rent again in 6 months.
IMO the only reason to keep a resi IP is because it cost you next to nothing and the capital gains tax on selling ti would be too high
will I be raising rents? pfff... as if a resi tenant would stand for that? interest rates? doesn't apply to battling tenantswhat state? - in nsw you can increase the rent every 6 months (with proper notification) regardless of whether they are under lease or not.
So in a fixed lease how does that work if the tenant is unhappy with the increase? So basically tenant is signing up to unknown rent?
I am just wondering... Is it normal in Victoria to have tenants on a 12 month lease?
Also, once on that lease, can you increase rent or you have to wait for the lease to expire in 12 months??
I am asking because we are in the process of getting our 2nd IP and it is in Melton south... settlement is on the 11th of January 2008. PM from the RE we are purchasing through gave me a quote for rent of $190 a week. I was just thinking if we have another couple of IR increases, I might have to think about a higher rent by the time it settles...
Also, once on that lease, can you increase rent or you have to wait for the lease to expire in 12 months??
I am asking because we are in the process of getting our 2nd IP and it is in Melton south... settlement is on the 11th of January 2008. PM from the RE we are purchasing through gave me a quote for rent of $190 a week. I was just thinking if we have another couple of IR increases, I might have to think about a higher rent by the time it settles...
You find this happens quite a lot where there is lease-break and they are advertising for new tenants. They will advertise at the same rental, but have an increase set in the lease for some time in the future. I am sure however, I have seen this rental re-set happening in less than 6 months.
Ip is in Qld - havent checked for clause allowing 6 monthly increase as when we discussed with the initial tenancy with PM we it was put to us as 12mths @ $270pw - no mention of review & I didnt think of it at the time either.
Was still pretty new then & expected the PM to guide us appropriately - have learnt alot since then & never agian will reply on PM like that!
Cheers
Stella
Hi MissMuffitt,
Yep, 12 month leases are the norm in Vic - from my experience at least. You usually won't see a rental increase until after 12 months - I'm not even aware if you can raise rents on the intial 12 month contract unless directly written into the lease. We applied for a property where the owner wanted a 24 month lease with a rental increase of 4% after 12 months - written into the lease.
Cheers,
Jen
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