Join Australia's most dynamic and respected property investment community

2 Year Lease

Discussion in 'Property Management' started by Shady, 11th Jan, 2016.

Tags:
  1. Shady

    Shady Well-Known Member

    Joined:
    20th Aug, 2015
    Posts:
    163
    Location:
    Sydney
    Whats peoples opinion on a 2 years lease term.

    I've had an applicant on a property that settled 3 days ago (woohoo) asking rent, starts in 2 weeks (when my cosmetic reno is finished). Couldn't ask for any more really except as mentioned in another thread they have pets, one lap dog and a cat. Originally they asked for a 12 month lease term, and I mentioned to the PM that a 2year lease may make it more attractive.
    My cosmetic reno includes replacing the carpet

    So anyway....thoughts on long term leases.

    No letting fee, No vacancy.......maybe no rent increase???
     
  2. HD_ACE

    HD_ACE Game-Changer Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    449
    Location:
    Perth
    Its great. Have tenants in the middle of their 2nd 2 year stint. Bit of a risk at first to see how they are. Could always start of on a 3 or 6 month then start from there.

    I put rent increases into the lease to make sure they are kept at market. Usually after 12 months a % or state the new rent.

    They are obviously looking to stay long term especially with pets so if every thing else checks out I would grab them.
     
    KayTea and Shady like this.
  3. Xenia

    Xenia Adelaide Property Manager Business Member

    Joined:
    21st Jun, 2015
    Posts:
    2,346
    Location:
    4/136 The Parade Norwood, South Australia
    It may need to be registered on title of the property
     
  4. Shady

    Shady Well-Known Member

    Joined:
    20th Aug, 2015
    Posts:
    163
    Location:
    Sydney
    mmmm My understanding was that the REI leases are not a registerable lease. Needs to be a solicitors lease for LPI to register the interest on title. Terms of 3 years or less are able to use the REI fill in the blanks type lease, anything longer needs to be a solicitors lease. That's the deal for for commercial property anyway.

    I doubt any resi tenant would know about registering the leas on title and I'm certainly not going to make them aware of it. I doubt any resi tenant would be interested in paying the ~$110 registration fee plus the ~$500 mortgagees consent costs anyway.
     
  5. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,580
    Location:
    Adelaide, SA
    It's a SA - only thing I believe.
     
  6. JacM

    JacM VIC Buyer's Agent Business Member

    Joined:
    12th Jul, 2015
    Posts:
    1,106
    Location:
    Melbourne, Australia
    I'm a big fan of the 2 year lease provided the tenants are good.

    Pros:
    • No cost to renew lease at 12 month mark (if the agent charges for it)
    • Assurance of income for 2 years rather than 1
    • Makes the property's value assured in a re-sale if it is a clear-cut investment property, such as blocks of units where only investors will buy them
    • Great sleep-at-night value if you are a worrier

    Cons:
    • If you need to sell during the lease, you'll only attract investors. Owner-occupiers won't be keen that a tenant will prevent them moving into their new home at settlement.
    • Trickier to get tenant out sooner if they become a problematic tenant
     
    Last edited: 11th Jan, 2016
    KayTea, Shady and D.T. like this.
  7. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,580
    Location:
    Adelaide, SA
    Great write up - always important to visit both sides.
     
    JacM likes this.
  8. JacM

    JacM VIC Buyer's Agent Business Member

    Joined:
    12th Jul, 2015
    Posts:
    1,106
    Location:
    Melbourne, Australia
  9. Chilliblue

    Chilliblue Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,579
    Location:
    Australia
    Anything longer than 3 years for most states

    As to longer leases we often have two years and one is on 3 year intervals (community housing) with no issues.

    Just screen the tenant well and arrange a decent increase each year.
     
    Shady and Xenia like this.
  10. Lil Skater

    Lil Skater Well-Known Member Business Member

    Joined:
    18th Jun, 2015
    Posts:
    384
    Location:
    Melbourne
    I usually like to start with a 12 month (give or take) lease, and then offer longer terms from there.

    On occasion I have jumped straight for a longer lease, but this depends on each individual tenant.

    I think @JacM has given a great little run down.
     
    D.T. and Shady like this.
  11. HUGH72

    HUGH72 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,122
    Location:
    FNQ
    I've had great tenants at one property who requested a 2 year lease.
    For Qld leases just make sure that a rental increase is built into the lease after one year etc otherwise you may find its rented well under market rent by the end of year 2.
    If they have pets its often harder to find a rental so they might want greater stability depending on the location.
    You may want to consider a 12 month lease first and see how everything goes and then offer a longer lease.
     
    JacM likes this.
  12. Shady

    Shady Well-Known Member

    Joined:
    20th Aug, 2015
    Posts:
    163
    Location:
    Sydney
    Thanks for the assistance. We've gone for the two year lease with a $10 increase in the second year. Cant complain, tenant application within 48hrs of settlement @ $450pw for 1st year and $460pw in the second year. Previous tenants who vacated in Dec were paying $430pw.
    Hopefully I can set and forget (famous last words).
     
    Lil Skater, D.T. and Chilliblue like this.
  13. Chilliblue

    Chilliblue Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,579
    Location:
    Australia
    Congratulations
     
    Shady likes this.
  14. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,580
    Location:
    Adelaide, SA
    Good one. Hope it sets & forgets :)
     
    Shady likes this.