some landlords will be able to increase rents and some wont. landlords must try and tennants must try and avoid it.
this is the free market system at work.
landlords ability to raise rents will depend on
– the demand supply equation for the area
– whether the tennant is prepared to pay more to stay put
– and yes whether the agent is able to sell the increase to the tennant.i rent my ppor and there is nothing the agent could say to me to make me pay more rent. i know the market and would simply give them 24 hours to decide on if they intend to increase the rent – then i will go and find someplace else. we are great tennants. no trashing, keep the garden clean, pay on time etc etc so if the owner wants to be be shortsighted then for me it also becoames a matter of principle.
Originally posted by aussierogue:some landlords will be able to increase rents and some wont. landlords must try and tennants must try and avoid it.
this is the free market system at work.
How very true. Just look at the number of young adults still living at home with their parents. There’s a threshold to how much people are willing to pay for rent i.e. tied to wage levels. Tenants will simply make sacrifices if rents are too high e.g. find cheaper accommodation, subleasing, moving back home with the folks etc
Unlike the petrol industry, there is no cartel operating in the rental market. People have a lot more options when it comes to getting a roof over their heads. Landlords can by all means raise rents but tenants don’t necessarily have to pay.
Aussierogue has a very good point. There are plenty of people in this situation. We are also renting ppor and if the agent asked as for more rent we would do exactly the same thing (if we were not already in the process of packing boxes).
.
It may be nice to think that we can control the market, however, as individuals it is highly unlikely that we can influence the actions of large groups.
.The above comments from Baloo / aussierogue and Don & Liz all confirm our research over the past 2 years and underpin our fundamental change in property investing philosophy.
Unlike Landlords who consider the “operation” just business, residential tenants take the rent issue very personally and will go to great lengths to avoid having to pay an extra $ 10 p.w. We always found that amazing, especially considering when you were cleaning up after them and the high cost rubbish that was discarded around the property (like bottles of wine, pizza cartons, cartons of beer, bottles of Jim Beam etc), which were all very readily affordable, but heaven forbid a $ 10 p.w. increase….couldn’t possibly afford it and will immediately move out.
Dealing with businesses and govts as tenants, they approach the issue with the same business focus as the Lessor does…and obviously running back to Mummy and Daddy or downgrading to a little unit aren’t options for these guys. The large business interruptions (locating a suitable alternative / changing stationery / informing clients of new premises / impact on staff travelling times and parking etc) all become hurdles that aid the retention of tenants in the favour of the Lessor, despite constant ratcheting up of the nett rent every year…
Good luck residential Landlords having to deal with flighty tenants…you’re fighting a losing battle. Residential PM’s would love it though with the recurring letting fees, bit of a boost from their perspective…no help from that quarter either.
Oh, and we don’t clean up wine bottles / pizza cartons anymore either. Property investing has become far more pleasant, and as a side issue far more profitable.
Cheers,
Dazzling
“Go hard or go home”
I’m not too emotional about where we rent. We pay the going rate for what we have and where we are. Thanks largely to my partner, who is almost neurotic about cleanliness, we keep the place in as new condition and have always been thanked by agents when they come to visit.
If we come across a landlord that for the sake of principle wants to raise the rental, when I know I can find similar elsewhere for a lower rent, then I won’t hesitate to move. We go above and beyond our duty to keep the landlords investment in top condition so I won’t tolerate having ‘principles’ applied on me.
This is also how I act as a landlord. I am currently allowing a tenant to live in one of my places at a rent that is below market for the area. He has been there for 4 years now and treats my investment as if it is his own house. It’s as good as it was, if not better, when he moved in. I won’t risk losing him for the sake of $30 a week. I could esily end up with the tennant from hell.
Every situation needs to have the pros & cons examined and the decision based on what is ultimately best for you and your investment.
Great discussion. Personally I wouldn’t increase the rent on an excellent tenant. Why not wait until they move out and then advertise the property at a higher rent.
Also, how about trying to reduce the property manager’s fees. Has anyone tried this? If they have managed a property for a long time, and there is a good long term tenant in place, there is not really much work for them, is there? [biggrin]
My online investing diary: http://www.retireyoungandwealthy.com/
Don & Liz and Baloo, great to hear you have had the foresight to rent while accumulating weath with IP’s. This is what I recommend to some people and it really makes sense. A client from Sydney was paying $460 for a unit in Abbotsford on the water that was worth $800k.
To buy this would be $1200/wk mortgage so the diff between owning(mortgage) or renting(haha subsidized) is a whopping $740/wk. Tha is a whole chunk of servicability to help get properties while still renting.
Eventually you could still use the FHOG and get a monster deposit for your “I want to own it” PPOR in a few years by selling off some of your IP’s or just leveraging equity off them to avoid cap gains.
Good work guys and…………….what was this topic again???
DD
PS146 Certified Financial Planner and Buyers Agent
Don’t sweat the small stuff,and it’s all small stuff!!Seems supply is dwindling and you might be able to demand more…
http://www.finance.news.com.au/story/0,10166,12485854-14302,00.html
I’ll be back in a year and renting, so my bias is that yields stagnate. I figure at least a year of renting and readjusting to the Australian lifestyle (read 12 months of inebriation and BBQ’s) before we know which suburb we want to live in.
HI DD,
It’s exactly like that in our suburb. You can rent brand new 3brm townhouses for 250-280 per week that are listed for sale at 510-600k. When we bought our home in the same suburb (2001) we paid 240k. Old fibro homes selling for 500k plus are renting for 200 per week. Just does not make sense to have a half million dollars of non deductible debt for the sake of a roof over our heads.
Good luckFunny you should mention “non deductible”. Over here home interest is a tax deduction! So owning (with a boarder) was only a few k more each year. But now heading back to aus, prices there are HIGHER vs income and interest is not a deduction.
They fret about LA house affordability, but Australian capital cities actually make LA look CHEAP [biggrin]. The economist article linked here a few days back shows how out of whack Australian prices are. So when my US buddies sulk about it, I just tell them about Brissy.
I’ll be renting until I’m comfortable that the imputed rent I earn by owning actually constitutes a valid investment!
The last few post only come to confirm that whoever does not increase the rent because he wants to keep a “good” tenant is making a mistake, particularly if the property is negatively geared.
Price increase = rent increse.
Interest rate increase = rent increase.
You tenants goes because you increase $5 ?
Good! increase another $5 and find a tenant that can afford to live in your property.If you do not follow this, you are subsidising your tenants rent. Remember they are probably already recieving your tax dollars, (collected by Robin Hood and the jolly men in the forest), in $90 rent subsidies through Centrelink.
May God prosper you always.[biggrin]
MarcOriginally posted by Marc1:I charge abusivly high rent that I collect with the help of a one eyed veteran of the Golf War that goes around with an aluminium bat.
Price increase = rent increse.
Interest rate increase = rent increase.
You tenants goes because you increase $5 ?
Good! increase another $5 and find a tenant that can afford to live in your property.If you do not follow this, you are subsidising your tenants rent. Remember they are probably already recieving your tax dollars, (collected by Robin Hood and the jolly men in the forest), in $90 rent subsidies through Centrelink.
This is bordering on insulting.
In no particular order
It was the Gulf War.
Tenant leaves and IP vacant for one week = loss of rent until you find a new tenant, if you use a PM add his costs(divide that by $5 and see how many weeks it takes for you to catch up. Heaven forbid you get a “bad” tenant)
Let’s beat up on those who receive rent assistance. Real tough. Let’s forget for one moment that we tax people who live below the poverty line then give them “assistance” and tell them that they should be gratefull for it. Do you think that if they weren’t getting that assistance that rents would be as high as they are now? No they would not. So in a round about way you are getting the hand out [guilty]
Let’s also forget that if you are negatively geared you are also a welfare recipient… welfare for the rich.[guilty]
I challange you to forgoe your negative gearing. After all you don’t want to have your hand out for welfare now do you?[guilty]
Here we go now with your arguments about paying too much tax [lmao] Try it from the bottom of the social ladder.
Tenant leaves and IP vacant for one week = loss of rent until you find a new tenant, if you use a PM add his costs(divide that by $5 and see how many weeks it takes for you to catch up. Heaven forbid you get a “bad” tenant)
That is precisely the rhetoric used by real estate agent. It makes sense in the micro cosmos of the weekly rent arithmetic but it damages the market and even the resell price or you own property.
Let’s forget for one moment that we tax people who live below the poverty line then give them “assistance” and tell them that they should be grateful for it.
Not really, the tax system is designed with the vote of the masses in mind. Tax high the (bad) rich and little the (good) poor. Make all as much dependant as possible and then waive a carrot to get votes.
Do you think that if they weren’t getting that assistance that rents would be as high as they are now? an interesting theory. I’m afraid we will never know. The real estate market has so many people trying to twist it their own way for political purposes that it is impossible to make any assumptions on the line of a “what if” credible analysis.
If no rent assistance I suppose you should add no housing department either….mm….I actually think I would like both events.you are getting the hand out…. ha ha good one but wrong. I am alleviating the housing department job and palliating the government shortcomings.
Let’s also forget that if you are negatively geared you are also a welfare recipient… welfare for the rich.
Do you really believe that? Makes one wonder what are you doing on an real estate investment BB….but hey, knock yourself out, no offence taken.I challenge you to forgo your negative gearing.
Negative gearing is an instrument to transfer losses from one line of income to another.
Stepped personal tax is a way to transfer the burden of taxation from the person of lower income on the person on higher income. Negative gearing is a stimulant of production, staggered tax system is a stimulant for mediocrity.The abolition of negative gearing would simply re-shape the market, and after a period of adjustment, opportunities will have different forms. To fantasize that a change in legislation will make all those evil cruel speculators crumble and let the masses surge victorious is naive to say the least. Such ideas fail to recognize the true process of success and the origins of failure.
…with your arguments about paying too much tax [lmao] Try it from the bottom of the social ladder.
My friend, I know each step of the ladder enough to know that we all choose the rung we want to sit on, it is not “the others” who make us stay where we are, it is us.
I wish you well and remind you that “We are what we think” (James Allen)
May God prosper you always.[biggrin]
MarcMarc1,
I refer you to my previous irrefutable point – not all (infact not even most) property investors need to raise their rents in line with the recent and upcoming interest rate rises. You may well be in debt up to the eyeballs, but many rental properties are fully paid for.
Cheers, F.[cowboy2]
May fallen angels watch over you.Marc – see youre stirring people up again.
As i said earlier, there is some correlation between rent and interest rates but not that much. Supply and demand is the major determinant for rental yield.
Marc – dont turn this into an US against THEM ideaological debate about the poor being programmed and only the strong will survive.
cheerio
“We are what we think”Indeed. Several things came to mind about your thoughts before I slapped myself for being judgemental.
My friend, I know each step of the ladder enough to know that we all choose the rung we want to sit on, it is not “the others” who make us stay where we are, it is us.I know so many people who for reasons that are either psychological, intellectual or circumstantial, who for this statement is not true.
I can only suggest that you get out and introduce yourself to some folk and listen to their story.
Edit: Wrist slapped, content deleted
Either this thread gets back on topic or it gets locked.
Play the ball not the man.
Simon Macks
Finance 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.
Tokyo Joe,
Here’s a story (true),that will kill your theory
of only raising the rent when the tenants leave.
After world war 2 (don’t mention the war).
A married couple rented a house in Manly, near the beach.The male refused to buy a house, as this is wasted money.
Two years ago he died. The wife lived there for another two years.It’s only now that the wife has moved into a nursing home.They rented the same house for sixty years. True story T.J.My rents goes up every two years. An increase of ten dollars.Thats an increase of five dollars per year.
It’s not worth the effort moving for a small
rental increase of five dollars a year.
I hope!bruham.
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