Had a call from my landlord today, the lease on my rental property expires on the 25th of June. Currunly leased for $200 p/week. She said that the tennants wish to stay but only on a month by month basis. I asked her thoughts on a rental increase and she recommened $5 per week, i was expecting/hoping for more. Is this amount fair? also is it reasonable of me to ask for say $220 per week considering that they only want to rent month by month as this dosnt give me much security, and then mabey is they resign for 6-12 months take the rent back down to $205-210 per week? I suppose the predicment i'm in is i dont want to lose the tennant and an extra $5-10 a week really isnt much.
Thanks
Tim3 trains of thought – if you have a $20 rent increase and they leave, how long is it going to take for you to recoup 1 week's lost rent (let alone agent's fees and the rest of the vacancy period)?
What is the market price if the premises is vacant ie how much would a tenant pay for similar accommodation? – How much more will the tenant have to pay if they move?
What is the vacancy rate in the area? How har will it be to lease out the premises?Tim, this is a very good post and one that almost all members of this site should read and consider. While it is difficult to advise on your personal scenario as you don't mention where the property is or what the property is. With a rent of $200 per week, I am assuming that it is a one bedroom unit in an outer suburb.
The biggest mistake that so many Investors make is not to create a contingency fund to cover any possible vacancy periods and the result of this (combined with their lack of knowledge of true rental values) results in the Tenant negotiating a low rent. With the current state of the market, almost all areas are reporting extremely low vacancy periods (Demand exceeds Supply) and this is going to increase quite a lot as more people who can't afford to purchase are forced to remain in the rental pool. Now is the time that Investors should be playing catch up on the low returns that they have been achieving over the past 5 or 6 years.
At present the vacancy period in Brisbane is less than 1% and most of our properties are being re-let prior to the current tenant vacating and at a higher rent.
Tim, my advise to you would be to phone a couple of opposition rental managers and describe what your property is and ask what figure they thought it should rent for and how long properties like this are taking to let (without disclosing what you currently receive). If that figure is around $200 and they advise that lets are taking more than two weeks, then you should accept your current tenants offer. However if they say $250 per week and they can rent it tomorrow then you would be a fool not to go for it.
Investing in property is not just about purchasing a property but about maximising the return that you can get on the property. This is a mistake that we as agents see far to often. Remember the return is not based on what you paid for the property when you bought it but should be based on it's current saleable value.
Even on an end of lease a Tenant must give two weeks notice to vacate and with the current demand, I would have to question the ability of any Property Manager who could not re-let in that period of time.
Ive noticed in the last few years PMs tend to prefer to lock in a new lease rather than go month by month. One key reason, kind of mentioned above, is the tenant can give relatively short notice to vacate, however you still must provide (4-8 weeks notice – depending on state). You cannot easily plan for a new tenant in 2 weeks.
Tenants may be thinking "why commit to a lease if we can get the same deal without committing?"
The answer is security of tenure for the tenant. Also, consider that the disruption and cost of moving for the tenant may discourage moving. If sufficient time has passed during the lease period, then they're probably due for an increase now anyway.
Increasing the rent now will encourage them to sign a new lease (at the increased rent level) in order fix the rent level for a period. Show them what happens without a lease. Why not charge $5-$10 more for a lease than month to month, because they have security of tenure, and a fixed rent period?
cheers
crest133thecrest | Tony Neale - Statewide Motel Brokers
http://www.statewidemotelbrokers.com.au
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Be careful when leasing out your property on a "periodical" or month by month basis. Most landlord insurance does not cover damage if the tenant is on a periodical lease. (Found out the hard way!) I always demand a 3 or 6 month lease & would rather lose a tenant than allow periodical renters in my houses.
Hi, a few more words to consider. What are the reasons for the tenant to ask for periodic tenancy? They might be young people waiting to move elsewhere. In which case, you're better off looking for new tenants. You have 3 weeks. Surely, the vacant period wouldn't be too long? Again, depends on how long it takes to re-tenant.
I once had a tenant asking to stay on month by month. My manager was very smart. He asked to increase the rent $25 a week. The rent was $300 & we hadn't put up the rent for 2 years. The tenant was building their own home & didn't know how long it'd take. They ended up staying another 6 months on $325 pw. The $600+ extra paid the cost of another tenant moving in. But then, my property was a very good one.
What you can do is probably increase the rent by $10 pw & ask for a bond + some kind of notice when they move. Otherwise, you might be better off looking for a new tenant. At least you know you have 2.5 weeks to find one.
Good luck,
KY
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