Hi everyone, This is probably quite a stupid question but I will ask anyway. I have had the same tenant for (2 years).
I have not raised the rent ever as I know he struggles to pay the rent. I would say he has been a reasonable tenant.
His lease is coming up for renewal, is it fair to raise it $10.00 extra, which my property manager is recommending. He is now paying $150 pw and he should really be paying $170.00 pw.If he should be paying $170, then perhaps you could explain why
Firstly, he is paying $150
and secondly, your guilt and angst at charging him $160Hi Marisa,
Based on the comments attributed to your property manager I would seriously consider increasing the rent. An additional $10/week = $520 of your money you are potentially missing out on.
On the other hand what is the vacancy rate in the local area and what are the typical tenants like?
If there are a number of vacancies in the area then you may well create a vacancy period as you search for a higher paying tenant.
In addition you could potentially lose $160/$170/week on letting fees with a changeover of tenant.
My answer – it depends on local market forces. Which suburb is your property in? I may be able to provide some vacany rates statistics for you.
Derek
My thoughts..
I he has been having trouble paying his rent an extra $10 might just tip him over the edge, if he has been a good tenant and keeps the place tidy etc, why increase just yet, let him know that you appreciate him sticking with you and leave the rent as is.
Why risk loosing a good tenant for an extra $10
Marisa,
No such thing as a stupid question- ask anything you like and people will be happy to answer.
It is possible to make an addition to the property- perhaps a ceiling fan, airconditioning, dishwasher etc, to justify the rent rise, if that’s the way you want to go. I would suggest though, that it is an “improvement” rather than merely bringing the property up to scratch.
I also agree with rags2riches- you will be taking a risk of losing a reasonable tenant perhaps if you raise the rent. That’s a risk you’ll have to weigh up. As we know, the whole IP market rests upon tenants- the better the tenant, the better we do out of property.
And I understand your reluctance to raise the rents- it’s bloody hard- particularly when you know the tenant’s circumstances. They’re just people like you and me
kay henry
On the other hand, if the market rent for this property really is $170pw as your manager says, and you are only going to raise the rent to $160, then your tenant is still getting a good deal.
I doubt if the market rent is $170 he will probably not find a property that rents for $150 easily anyway.If everybody is keeping their rents much lower than market rent, then rents are never going to rise.
As has been said, it depends very much on the vacancy rates in the area- ask your PM if in the worst case the tenant moves out, how quickly he/she thinks a new tenant can be found at the rent she recommends, and double check the vacancy rates of the area yourself, see how long it generally takes for properties like yours to attract a tenant, and at what rent.Let us know what you decided and how it worked out!
[smiling]“I doubt if the market rent is $170 he will probably not find a property that rents for $150 easily anyway.”
Sorry this sentence didn’t make sense and I can’t find an editing button??????
I meant to say that I doubt that he will find a property like yours that will rent for $150 if the market rent is $170.
I too am going through the same dilemma.
I have a great tenant (and thats what the other owners say too) whose lease has ran out and is paying $155. Its a 2 bed unit and the front one was asking $175 and the owner in a body corp meeting told me how much bigger my unit is. I think he probably got $165-$170 in the end as it was unoccupied.
I have a property manager and I let them make the decision. So we have bumped the rent up $5. I do feel a little guilty (but I shouldnt) because I am told she has two young kids.
Worse case is she leaves. She has been there for 3 years and I expect her to stay. When I last spoke to property manager she had accepted the rent increase but not signed a lease.
So time will tell.
Yack,
A $5 rise isn’t soo bad
My question relates to your tenant not signing a lease on a higher rent. Wouldn’t you HAVE to sign up an agreement if there is a rent increase? If it is not written down, it is just a gentleman’s (or woman’s) agreement. But I reckon such a verbal contract would not be valid. Leases are legally binding and cover all matters including rent increases. I reckon you need one for this.kay henry
The problem associated with not raising the rent in line with the market is that when you actually get so far behind the market.All of a sudden need the raise rental amount but you cannot. If you were charging $150 (as your guilt kept you in check) and the interest rates went up 1-1.5% you would want to raise the rent a bit to cover the loss in income. If the market had got to $190 by this time you would not be able to raise the rent by $40 in one hit as the tribunal would consider this much in one rise is an unacceptable percentage. Had this happen to me once. (As the system in VIC goes anyway.)
I charged my clients a standard rent for the first 12 months and didn’t put it up. At the end of the next 12 months I put the rent up to the last years amount. This meant they were always getting a discount. I did this with good tennants only!! Bad tennants got a hefty rise at the end of 12 months to help them to decide to move on to a cheaper home. If they are good, be good to them and maintain the house but the rent is your due. NEVER FEEL GUILTY ABOUT YOUR DUE!!
In Victoria.
My understanding has been that I can increase the rent if I give 3 months notice. A letter is sent from the property manager. If they want to stay on a month by month, they then start to pay the increased rent. If they want to leave they give 4 weeks notice.
So eventhough I dont have a 12 month lease, I still get the increased rent after the 3 months notice.
Thanks for the info, yack :o) Presumaly it’s the same in NSW as well.
kay henry
just up the rent, honestly why worry if it still undermarket value, if this person cant get any cheaper else where, theres not much they can do with up rent that still remains the cheapest…
Cheers,
sishello everyone, thanks for the advice/suggestions. I spoke to my PM today and the tenant is quite happy to pay $160.00 and requires 60 days notice (as per lease agreement).
I have decided to upgrade security as a trade off which I think is a win win for all.
Cheershi all
my situation is similar
3 guys renting my place in doncaster
$230/wk for the last 5 years
cos they are working boys i felt reluctant to increase rent, let them get a good footing etc.
i know the rent has increased over last 2 years but i held it off for this long
checking out the rent for a 8 room house, its prolly bout 265 – 285/wk
i wanna increase to 250/wk, initially felt bad but i thought, 3 guys, gave them a good standing already, been a good landlord etc
they come back saying not happy and might want to move out but seriously, i think my house is best value for money atm
my PM, quite nice and communicates well, i think reluctant to increase it but i insisted
so anyway its now more than 2 months after initial communication, and trying to sort it outany thoughts
fifi- an 8 *bedroom* house????????? Or was that 8 rooms? sheesh, if it’s an 8 bedroom house, that;s some motel you have there!
Ultimately, it’s not up to your PM to be reluctant. He isn’t paid to show reluctance. He is only paid to show us love
) hehe. Seriously, tenants for 5 years with no rental rise- they’re doing fairly well. I lived in the same shared household for 12 years. In that time, we had NO rent rises. Then we got a letter saying the rent was going to rise from $170 to $180 (for a 4 bedroom house), and one of my flatmates screwed her nose up. I said “oh, come ON! We’ve had it so good for all these years. This is nothing!”I think sometimes it takes people a little while to adjust to these things. I didn’t raise the rent for my tenants on my coastal property either, but they had very part-time/casual work. I don’t think I would feel guilt pangs (former catholic) having working tenants.
And fifi, your rent rise is incremental- it’s not dumping on them in a huge way. It’s also still less than market rental.
kay henry
Marisa, If the tenant is struggling to pay the rent he is obviously on a low income or a pension, has he looked into the possibility of getting rent assistance, this may ease the burden of a rent rise.
FostonLook at it this way;
You are losing $10.oo PW with your reasonable tennant.
Increase the rent and the reasonable tennant may decide to vacate the property.
The property is re-let after a 3 week vacancy @170 PW
It will take you over 26 weeks to recoup the $450.oo lost during the 3 week vacancy.
From that point on you will be ahead by $1020 PA instead of behind $520 PA [thumbsupanim]Age
Buy new!
Never Sell!Rent increase must be seen as a business decision.
When I bought my first Sydney IP, it was rented and the tenant had lived there for the past 5 years, last 2 years paying $200. When I asked the PM why had the rent not been updated, she said the usual, that it’s a good tenant, you may loose two weeks rent or more if they leave, etc.It reminded me the reasoning some people make when they keep on repairing their car instead of trading it in for another. They end up with a 20 y/o car that is worth $100 and need to fork out 20 or 30k to buy a decent one.
I though if the tenant leaves it will be a pity but the next one even at risk of losing one-month rent will be paying market rent. If I keep the rent unreasonably low, I am hurting myself and I am screwing the market. So I put the rent up $20 to 220 and have kept it up to the market value ever since, with no ill effect on the tenant.
As for the guilt side of things, I see no guilt in the supermarket when they keep the prices up to date according to market forces, nor I see it in the petrol station owner, and no guilt whatsoever in the vendors face when they ask for a sometimes ridiculous price.
Prices are the result of offer and demand, if you have a house in Balmain you bought for 150,000 15 years ago, and now is worth 900,000 are you going to feel guilty for charging the tenant $700?Remember that many of the lower income tenants recirculate your own tax in the form of rental assistance, between a rent of $42.20 x week and a rent of $106 x week, each $10 you increase the rent is subsidised by ~$7 with your tax, up to a maximum of $47.20 x week with some minor variations according to circumstances.
May God bless you
and prosper you.
Marclol kay
its 3 bedroom
8 rooms total split level
doncaster vic
thx for input, i will pursue this issue with my PM
) hehe. Seriously, tenants for 5 years with no rental rise- they’re doing fairly well. I lived in the same shared household for 12 years. In that time, we had NO rent rises. Then we got a letter saying the rent was going to rise from $170 to $180 (for a 4 bedroom house), and one of my flatmates screwed her nose up. I said “oh, come ON! We’ve had it so good for all these years. This is nothing!”
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