Hi everyone,
I'm hunting for my 3rd IP and have come across some potentials. I have found a property in the low 300K bracket, however, it is returning $210 pw rent. I have looked up rentals and spoken to agents with other properties in the building and area, and believe the market rent is around $340pw. There is a near identical unit in the same building returning $340pw.
The current tenants have lived there for 5 years.
How would I raise the rent to an acceptable level???
Can I ask for vacant possession then re advertise?
Can I raise the rent by over $100 pw? (then have the tenants appeal)….
Or have the vendors limited purchasers to PPOR buyers due to the ridiculous rent?
Any suggestions would be appreciated. It is a good valued unit, however, the current rent is a deal breaker.
Thanks,
Simon.
Is it an open lease? Are the tenants doing other things in regards to rent? (ie. sometimes my tenants stain/paint in lieu of rent?
They are on an expired lease. The agent has told me they have been good tenants, but it has obviously been a long time since the rent was raised. There is nothing being done by the tenants to reduce the rent.
Thanks Maree.
Recently purchased a house that was receiving $250 a week rent, well below the market rate in the area. Once we bought the house we were able to negotiate a price with the tennants to $330 a week. Since they had already been in there for 8 years and took care of the house so well, we wanted to keep them in so we settled a bit less then what we were after.
If in which case they declined, the house is in a well located area and we are confident we could have got other tenants in for $350. In fact the Real Estate told us they had alot of people on their database waiting to get into a rental property in the area (could have been a lie though).
Maybe talk to the real estate again and see if they have many people interested in the area for renting?
Thanks Dru, however, I'm not sure if you can kick tenants out just to raise the rent. (please let me know if you can).
There is a high rental demand in the area and we would easily be able to get market rate within a week of advertising.Simon
Correct me if I'm wrong you can certainly ask for vacant possession when you enter into contract to buy any property, no?
It depends on the state you are looking in as to whether you can kick the tenant out when you purchase the property. I know in the NT when you buy a property, the tenant continues on their lease until it expires. Call the Real Estate Institute in your state to find out what the deal is.
Cheers
K
Look at the website of the Tenants Union in your states – these are for tenants, but are a good source of info on what you can and can't do.
Maybe you could increase the rent by $50 pw every 6 months until it catches up. Do it slowly (so they won't notice!).
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks for all the suggestions. I think I will ring the Department of Fair Trading tomorrow. We can definitely ask for vacant possession, as the lease has expired. I am concerned about the fact we have no intentions of living there ourselves so the current tenant may have some rights regarding us asking for vacant possession only to raise the rent.
Simon.
If it is NSW then as sitting tenants on an expired lease you can get vacant possession. For your own protection, I would suggest getting a new lease in place with the rent increases noted. You will need to give 60 days notice for each rent increase regardless of whether or not it is in the lease.
Make the purchase conditional upon the selling (or managing agent) getting the tenant to sign a 12 month lease with 2 increases, the first 60 days after commencement, the second 6 months later. If the tenants aren't happy about it, you can always get VP (only needs 21 days notice prior to settlement in the case of an expired lease).
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