Hi Landlords,
At what stage does a landlord look at increasing the rent as interest rates climb.Does a lease exclude a rent increase until it is renewed? Or can it be put up after giving 60 days notice?
To you long term landlords who have ridden a few waves, at what part of the cycle does the rent return increase so that a current purchase of an IP becomes CF+ve or even nuetral instead of nearly all CF-ve as it is now?
Regards SummoMany RE investment advisers suggest it is better to raise rents only when you have made an improvement to a property or to reach market rents. If your properties are receiving market rental yield, what’s the reason for raising rents?
The other thing is, if you raise rents, your tenants might scoot to live somewhere not contingent upon RB decisions, and instead of that extra 5 bucks a week, you’ve now got a vacancy.
Should tenants bear the brunt of rising interest rates? To my mind, no.
kay henry
G’day Summo…
Increasing the rent??????
The biggest problem is going to be able to find a tenant who is now able to take his/her pick.
Don’t be surprised if you get a request/demand for a rental reduction.
Cheers
Bill
Bill O’Mara
Real Estate,Mortgages,Share Market Strategies.
[email protected]Think back to your high school economics. Remember the laws of supply and demand?
When there are more tenants than available rentals then demand rises and prices will rise.
If there are more IPs than tenants then demand is reduced and prices will be reduced to win the available tenant.
The landlords, unless they all get together and price fix, do not have much individually have much impact in manipulating this economy.
The market is not too fussed on what you pay for your mortgage.
As far as your lease goes you will need to read it or check with your PM as to what you can do. It is different in each state.
Cheers,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Thanks for your replies, however now that interest rates are increasing, housing costs are at an all time high, and young couples are chasing the ever increasing deposit and not being able to make it, more people are entering the rental market. Areas other than Sydney & to a lesser extent Melboune, have a low vacancy rate.I have relet 4 properties in the last 3 months all with a healthy increase in rent, so there is demand. If you listen to some Property managers who cry gloom & doom so they can keep the rent down & thus get new tenants with the minimum of effort then the rental market is going to stay depressed. They dont care so long as they get their percentages for doing very little.Why shouldnt tenants contribute to Interest rate increases? Maybe we should have a landlords get together so we can achieve a reasonable return for our investments.
Regards Summohehe summo- well, if you know the answer, then why did you ask?
kay henry
With one of our properties we have owned for nearly 4 years, the onsite manager increased the rent each 6 months by only $5, and the tenants didn’t complain. There were a couple of changes of tenant and the last people have renewed at the $5 increase.
Tenants sign a lease for X amount of rent for X time. During the lease, the tenant can be given 60 days notice of a rental increase. Not all property managers are like the above, but I think that in the case of long term tenants, a small increase is warranted to keep in line with current rentals. eg.yearly review. Eg we have had tenants in a house for just over 2 years at $170pw. You can’t rent anything much in the area for that and I think we could increase the rent say $10pw. It’s a 3br we purchased for $80000 and renovated for $8000. But seeing they are good tenants and it’s +ve we’re not going to put the rent up. It may need re-roofing in a few years, new HWS and stove by then. Have 2 other 3BRs in the area, one just relet from $180 to $190pw because I asked that the PM advertise it at that, and $220pw. When we bought these houses, we knew we wouldn’t have a problem should rates rise – that was one of our strategies.
Annatwo of my clients have recently reduced their rents to attract customers (in Sydney), it does seem that there has been a down turn in certain areas.
I got a good tip from Michael yardley’s newsletter. That is if you want to increase the rent by $10 per week, write a letter to the tenant saying rent will increase by $20, unless they have any objections. If they object, make it $10. They fell like they got a discount and are happy, and you get your rental increase. If they don;t object, you’ve got the full $20 increase.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I go off CPI to increase the rent, ie the cpi for darwin is now 2.4% so the rent should go up 5 dollars. I have checked with the other owners in the same block of units and there rent is 270 per week where as mine is 265. Due to the wet season etc I have no intention of increasing rent till june next year. The other owners are finding it hard to find tennants (again due to the wet season) so its prudent to do your homework. I speak to other agents etc to find out the going rent for my street etc then act accordingly. As steve says the tennants make you money not the property.
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