Which do you think is better to do CPI increase or a set % increase each year on your tenants rent?
From experience, CPI has never reached anywhere near % increase on rents.
The highest in recent memory was like 4.0%? Rest of the years has been well below 5% which is what I have on my old lease! Getting a tenant to agree to this, however, would be a challenge!
Disclaimer: I'm not an expert and please don't take my advice as professional advice.
Keiko, tenant is your golden goose. Flatten him with rent increases and you wont get any golden eggs. Make sure your rents are competitive and fair, but in the end you shouldnt be looking at the rents as your main supplement for income. The tenant should always be paying within 15% of the current rent level, and 10% of the current rent level if you are being strict. Make the rent change date the same each year .. so the tenant expects it.
Most of the deal with rental property is not to get rent from the tenant. Its to keep a tenant in the property, paying his way on a contribution to your welfare. The tenant leaves .. you have to re-advertise for a new tenant, repaint, fix things. There are significant costs with swapping tenants in and out of a property. So, a happy tenant is your golden goose. Respect him for this.
Dont let rentals get too far from the mark or you'll end up screwing yourself though. But a rule of thumb on increases is .. $5 a week they wont blink an eyelid, $10 a week they'll grumble and take it, $15 will see them rioting and sending you letters for the rental tribunal. So you really dont want to get into a situation where to bring it up to date you have to bring it up $15 or more.
I like to keep my rents close to the current rental level but not AT the rental level. I allow a $10 slack that i bear on the basis that he looks around .. and knows he'll be paying more if he leaves me. If he leaves me .. heck .. the NEXT guy gets the current rental level.
Set 5-10% Increase….CPI is only 2-3% not worth your time…
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Good points noted by xdrew.
Is there any standard annual rental increase that can be followed to be on a safe side?How long is a piece of string Michael?
There is no single answer to this one. Depending upon the property type you may have a ratchet clause but if it is retail (except Qld) it must be nominated as only % or cpi.
Shape, you are dreaming that you could get a tenant to agree to 5%+ pa increases (unless it was a cpi clause) – how many businesses can sustain that sort of growth in their occupancy costs?
Willister, cpi was about 15% & interest rates around 18% under Bob Hawke/Paul Seating, so not that long ago.
It depends on the area and demand…
i have 3 IP:
1- increased by 15% ( 6 month) – Sydney CBD apartment – of course all agreed upon by the tenant
2- increased by 10% (6 month )
3- 5% increase onlyRegards,
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Scott- that is true you cant really “have a set % on how much you can increase by” – i wont argue on that.
and true 5% is a huge amount to ask for a increase…but if the area your got has a spike in demand- then why not ask for 6?7?8%? it’s within the contract and agreed upon by the tenant.
FYI – http://www.oldlistings.com.au/real-estate/NSW/Haymarket/2007/rent/ Look at 2 quay street haymaket.. Yes it does go up and DOWN…
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
these are asking rents for short-term rental not rent under a lease agreement, I can’t even be sure that these aren’t the asking rent for various units with differing fitout. If the apartment management is seeking to fill a vacancy at short notice then the rent may be discounted, same as ‘last minute’ etc.
Rents can fall if cpi is negative over the review period but this is rare – even at the peak of the gfc we did not have 2 successive quarters of shrinkage.
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