I have a unit in Sydney Inner West. Eighteen months ago tenants moved out and the market was very soft (not good) the then agent had problems of finding new tenants. I switched agent and got new tenants, but had to drop the rent by $20 a week. Now, I found out the unit next door in the same block is being rented by the same agent for $50 a week more than mine. I phoned the agent and said maybe we should look at rental review – due to a stronger rental market now and increased cost (ie interest rates and land tax). He said he would not recommend it because it is cheaper to keep current tenants (their 12 months lease expired and they are on month-to-month tenancy) than to increase rent. If tenants decide to move out, then the costs of advertising, vacancy for a few weeks, one-week leasing cost for new tenants will be more etc. I told him these costs are not avoidable but I will be getting higher rent in the future. I have spoken to the owner of the unit next door and she said she has no problems with getting tenants and she got the rent she asked for. My questions for help from the forum are:
1. Should I get rid of the current agent and go to another agent? It seems like he treats me differently from another client (renting the unit next door for $50 more than mine and refusing to increase rent on mine) and puts the interest of the tenants before mine.
2. How do I give the tenants notice of rental increase – if the agent won’t do it for me? I told the agent that since the tenants are already there I don’t want the full $50 a week increase, instead a $30 a week increase. This means, current tenants are still paying $20 a week less than the tenants next door.
3. After some phone calls, the agent agreed to write to the tenants about rent increase, but he has not done that yet. I am worry that the longer he delays the market will change and I may have problems of finding new tenants.
Please, if anyone can give me some advice, pointers on how I should deal with the agent in this case. Or, am I wrong and agent is right? Thanks in advance.
Surely, if you want to increase the rent and the one next door is $50 per week more you have the right to do so. As you already know, you risk that they will move out, and you will lose a couple of weeks rent (maybe more, maybe less) plus the cost of getting new tenants.
We lowered our rent in Brisbane to get tenants two years ago. We were advertising at $320 per week but had had floors polished and some other work done so had lost some weeks rent and needed to get some income stream quickly.
Mind you, the tenants (who are fantastic tenants by the way) said they loved the house and would like to pay $275 per week – yeah right!! We settled on $300. One year later we increased to $310 and while they have now gone to month to month, we don’t wish to risk losing them with our interest in advance due in a month, so we will not increase again for some time.
They are in a good house paying slightly less than market value, but it suits us to leave them at the price they pay, and they are great tenants.
I’d sack the agent. We’ve never used an agent and have only had one bad experience in 25 years. If you can afford to ride out a couple of weeks lost rent, I’d go for it. Only you know your position and whether you can afford it.
If they do leave, use the empty time to do anything you can to make it more appealing. If you can’t afford to take the risk of lost rent, maybe increase it $10 per week and again in six months. It costs a lot to move and maybe they’d stay rather than pay a carrier.
Log onto the Residential Tenancies Association RTA website (Qld – not sure what it is called elsewhere). That website gives you all the time limits involved in giving notices etc, plus the forms if you want to do it yourself.
Good luck.
Wylie
Before you sack the agent, it may be wise to look into rents in general in your area. The one next door may be unusually high.
However, it is your call, you are the boss. If the agent is no following your instructions, then terminate the agreement with them. $50 pw is a lot of money.
BTW, each proeprty an agent manages adds about $2500 to the value of their business.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Thank you, Wylie and Terry, for your comments. They are very useful for me to think about what I should do. The agent said to me what would happen if the tenants would not pay the increased rent and move out. I said then I would be prepared to find new tenants. While that is happening, I will probably find a new agent and repaint the place. It is new 4 years ago and could do with a fresh coat of paint. Again, thanks for the helpful replies.
I would ask owner of te adjecent unit whether her unit is different from yours where it might command a higher rent, for example:
* It could be a lease-option
* Perhaps her unit is bigger size bedrooms/living area, better layout, has an extra car space or have built in robes where yours does not etc.If units are the same ask who her agent is and approach them with your problem and seek their advice – as Terry says sheck general rents.
Perhaps you my offer an incentive for new agent to take over management of the property?
Hope this helps with some ideas to think about!
Rgds
Peter[cap]Thank you, Peter, for your reply. My unit is exactly the same as the one next door (with the higher rent). She has not done any improvement to it. I have been to her unit previously. All the units in the front were built identical in layout etc, and the ones in the back were built identical (they have lower rent because outlook is not as nice). I am going to talk to a few other agents around the area to see what they offer. I have checked the internet and found that my rent is below where the current market is. I have done the research on rental market and told the agent so. Maybe I should sack him, like everyone suggested.
Before you sack the agent, schedule a meeting with him / her. Tell the agent you need to discuss managing the property and can you find 30 mins when you won’t be interrupted etc.
Find out why the agent doesn’t want to increase the rent. Tell the agent how you feel (eg that they aren’t doing what you want, and you are considering finding another agent) and that other investors you have talked with are advising you that it doesn’t sound like you are getting the best advice from the agent.
Make a list before you go in, of any issues you want to cover, so you don’t forget.
Don’t be deterred if the agent becomes defensive or tries to make you feel bad. You have done the research, you are right. Don’t be afraid to confront the agent assertively either.
You both might learn something from the experience, and in the end, you can still sack the agent if they can’t explain themselves satasfactorily.
Remember they are working for YOU, not the tenant!! (But it’s in your best interests to treat the tenant the best you can.)
It all comes down to good communication.
The hound.
Hi babu,
All things being equal with both units, there is no logical reason why the agent would be giving you this crazy advice and treating you like this.Confront the agent and don’t put up with their lazy attitude. That $50 difference in Rent is outrageous! It seems you right in believing that you should be getting at least $30 more.
(Some) agents like to believe that they are a rare species (especially PMs)! Don’t put up with their crap. Look around for another one and move forward.
[biggrin]
everytime my agent/landlord increase the rent, i moved out (because of greedy land lord), being such a good tenant i believe that we should be treated fair as what we treat the property (i look after the property).
Depends on what type of tenants that you are facing, it will be up to you to make a decision. Of course i will be looking around my neigbourhood to see how much i would be paying (not just next door). if it is less, then i am happy, if i pay more, why should i pay more ??? i will go away and look for another place.
PS: a thinking as a tenant.
Hi
How long have the tenants been in the unit next door. I own 2 townhouses they are practically identical except one has an extra carport.The one without a carport rents for more because the tenants have been in there along time before rents started to drop hense why they pay more, the other one has came up for rent a couple of times but the local situation means that I cant raise the rent thatmuch without having the townhouse vacant for toooooooooooooooooooooooo long. Maybe your agent is telling the truth yoou just need to dig deeper.
ErikaThanks, all, for all the good advices. Late this afternoon agent phoned to say he would do the letter to the tenants and there is a 30 days for tenants to respond, another 30 days after that tenants either move out or agree to pay the increased rent. So, there is at least 60 days wait before I find out the result.
I would not be pushing to increase rents in the current market unless the rental demand in your area is high.
If the tenants move out as a result of your $30 rental increase request and the property sits empty for just 2 weeks, which is highly likely, It would take you 18 weeks just to break even (assuming the rent was $270 and increased to $300). Any longer vacancy could be a disaster!
Robert Bou-Hamdan
Mortgage Adviserbabu88,
In my experience, agents are great at attracting tenants but are useless at securing attractive rental yields.
With my IP, the agent said they could get $340/wk but that would cost me 9.9%, leaving me with about $305/wk. Instead, I put a 3-line advertisement in the paper for $63 & got a tenant the day after settlement who paid $360/wk.
We had problems with this tenant & got rid of them after about 4 weeks. We readvertised (again $63) & got a new tenant within 10 days who paid $380/wk + pool maintenance costs.
Over a 12 month period, the difference between our $380/wk and the agent’s $305/wk more than covers the income lost from 10 days vacancy.
The agent is paid to work for you. If the agent is unable to follow your instructions, I would get rid of them & either find another agent or do it yourself.
Best of luck with your investing.
Cheers,
Jason.Thanks, Jason. I have done similar number exercise like you. I think the agent knows that I have a mortgage and therefore I will panick if the unit is vacant for too long. Now I have to wait to hear the response from the tenants – and the result won’t be known for another 2 months. When tenants want to vacate they give 30 days notice and when landlords want to remove tenants they have to give at least 60 days notice.
Definately replace the agent you feel they are not working for you! It’s worth changing agents many times till you find one that’s actively managing your property.
A slack can cost you as much as a bad tenant!
In regards to how much rent you should ask for your unit, ask around a few agents and you can get a pretty good idea what is reasonale.
The agent certainly does sound unreasonable – but equally to gain maximum benefit you should think about retaining the tenants if they pay on time and look after the house.
Inner Sydney does seem to have a stronger rental market at the moment than it was about a year ago, so you may not have to wait too long to get it re-rented – however if it’s vacant even a week it’ll take a couple months for the extra rent to make up for the costs. And it’s much harder to show a rental while the tenants are still living there, as people find it harder to envision it as their ‘home’ (and they might end up chatting to the unhappy ex-tenants).
Good tenants are a valued commodity, and regardless of how much the place next door is renting for they are going to be surprised by such a huge hike in price. Interest rates have only gone up 0.5%, inflation is about 3%, but your rental increase is… about 10%? The fact that they got it in a soft market doesn’t mean anything to them.
They might find a 5% annual rise reasonable, but more than that? It might be a good idea to offer a sweetner – such as install a dishwasher into the deal.
This gives them a feeling that you’re not all take and no give, it value-adds to their home, and it gives your investment extra value if they do move on at a later date. (It will also be tax deductible for you). You can also take this opportunity to lock them in for another 12 months so that you have more security.
Thanks, Luci, for your reply. Have thought about the points you mentioned.
Mmmm,
Feelings…isn’t that a wonderful word.
“The tenant might feel that the Landlord is all take and no give”.
What, with Council Rates / Water Rates / Land Tax / Insurance / PM fees plus add ons / Maintenance costs at the whim of the tenant plus all else being ripped out of the Residential Landlord’s pocket before the mortgage payment, plus supplying the roof over the tenants head without fail every day – no excuses there…
I think it’s a bit rich when the tenant wishes to screw the RLL down as much as possible and then on occassions decides that, despite what is writtne in the lease and signed off by both parties, paying the rent is optional.
No – in most instances the RLL gives far more than the tenant. But then, as most tenants say – “I don’t give a stuff what the Landlord thinks or has to put up with, I’m only interested in getting this place for as cheap as possible.”
All of this tip toeing around the tenant and scheming ways to not offend them – I don’t see the “feelings” reciprocated.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Feelings are what you get at the dentist aren’t they?[biggrin][biggrin]
It’s all about negotiation with rents, achieveing an outcome that you both accept.
I have a tenant with some medical problems and going through a difficult stage in her life, we’ve decided to leave the rent as it is for the last two years, the $5 or $10 rise may have forced her out and we’d be up for the cost of advertising, agents inspections fees etc.
Our tenant is hardly ever there and the gardener looks after the gardens, we’ve got the tenant to sign a lease giving both us and her some stability.
REDWING
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