Hi all,
I have a unit in the lower north shore of Sydney. I purchased it 1 year ago and rented it out straight away for $50 pw more that what I had expected. I have had no problems with the tenants at all.
The anniversary is up, and I had planned to call the agent and see if we could negotiate a rent increase. I was a bit slow off the block, and the tenants called me before I called the agents. The tenants made an offer to sign on for another 6 months and to ditch the agent and split the difference. I told the tenant that I had planned to raise the rent, as rents in the area have skyrocketed. I was given the usual story how one of the tenants are moving out and the two remaining wanted to stay but could not afford a rent increase.
After discussions with my wife, we decided to sign up the tenants for another 6 months at the same rent, but ditching the agent, hence increasing our income by around $30 pw. We plan to raise the rent further in 6 months.
What are peoples thoughts on sacrificing $10-$30pw to keep good tenants?
I figure the risk of having the property vacant for 1-2 weeks then possibly not getting the best tenants is not worth a small rise that could take 3-6 months to pay off.
At this stage it is our only IP so managing it ourselves in no big deal.
Any comments???
I wouldn't be without an agent. It's not because you can't arrange for repairs, sure, you can do that. But there is a lot of complicated legislation that agents have to keep on top of to ensure that everything is done properly. For the 90% of the time when everything is straightforward, yes, it's "money for jam". For the other 10% of the time, you'll be very grateful that you paid them that other 90% of the time when you didn't need them, because they'll be worth their weight in gold.
I would never let rent fall below market value to retain tenants. If you're $20 behind market after this signing, in 6 months' time when you should be raising $50 again, do you raise only $30 to sign them again? Now you're $40 behind market. If your tenants can't afford your property, best to get a new tenant who can.
I agree with Trakka.
What you have done is now set the market rent for your property lower than it should be. It devalues your property as well.
Thanks for your input.
I can see your point regarding being behind the 8 ball for the next rent increase. I guess I was focusing on our extra cashflow when I should have put a bit more preasure on the tenans now, so it won't be as big a push next increase.
I disagree with agents being all over complex legislation, however, I have never been stung………. I am in a luck situation where my wife works for a property solicitor, so if we hit any trouble, we have advice on tap.
Simon.
I would have to agree with the previous postings. I also got the spiel about 'excellent tenants' from my current property manager for the last 18 months. Always it is 'we will raise the rent more next time, but meantime it's worth hanging onto these tenants, you don't want to lose them'. Now the situation has spun out to the point Iwhere am getting way below market value, am stuck with whining tenants who won't move out and resist rent increases (I keep suggesting to the agent how about they move out if they don't think market rent is worth it). I am actually suspecting that the tenants are friends/relatives of the agent, and have just handed the property to a new manager together with a hefty rent raise to bring the property back to market rent.
Just think of yourself, you have to cover each interest rate rise too, and it is a landlord's market out there now.Pudestcon wrote:I agree with Trakka.What you have done is now set the market rent for your property lower than it should be. It devalues your property as well.
Hoe does charging a lesser rent devalue the property?
I've never heard of this ever.
It may have an effect in an area such as a mining town where a large number of properties are used as rentals possibly.
It may make it less desirable to an investor due to the smaller rent yield, but with resi property, the majority of buyers are owner/occupiers, so they set the prices.
Touch wood; at the moment all our tenants are long termers and all good payers.
I'm keen to put up the rents like anyone else, but I leave the increases to the PM to suggest.
When a new lease comes due, I discuss the rent with the PM and ask for their opinion on the level of increase to apply.
I know for a fact that one of our properties is currently around $20 per week too low, but the tenants have been there for 2 years, are great and want to stay on, so I am happy to wear that until the next lease renewal.
A small shortfall in the rent is nothing in the long term if you have good tenants and low vacancies.
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