How do you decide when and by how much to increase rent

I have a ip in one of the outer suburbs in Melbourne - Cranbourne.

The rent has gone down in cbd and inner suburbs whereas some of the outer suburbs have seen a increase in rent.

Mine is a 3 bdr house and is rented for $360. From the new rental ads I can't see a big difference compared to 12 months ago in Cranbourne.

My tenant is awesome and always pays rent on time. Looks after the property and takes care properly. An extra$10-15 /week won't make much difference to me. Is it even worth increasing?

But in general , when do you guys usually decide to send a increase in rent notice? Do you wait for 12-24 months or depends how the rental market is going ?

 

Not in my opinion.

 

Age Old Question - To Increase Rent Or Leave As Is?

 

What you described is a tenant. One who's doing what they are suppose to do.
If you're a landlord that does what you're suppose to do, meaning providing them with a rental in good repair and respond to their rightful requests - it doesn't make you "good" landlord. Just landlord.

If rent went up by much (and it did where you), I don't see a reason why not to increase rent.
Don't go nuts, but getting to the low-mid rent level of your area for similar property make total sense.

You're not charity. It's your investment.

If you invested in the shares, and the share price go up - would you say "oh, no thanx. I don't want the additional value"?

 

Balance the risk - reward

What sounds like a good tenant potentially vacating (or at least starting a cursory shop around) vs an extra $10 a week which wont make much difference to you?
You've pretty much answered the question yourself.

 

The market now in the SE Melb is of shortage in rentals.
You get large number of applicants for rentals that are reasonable.

So risk of loosing rent is quite low, given the OP could increase rent to mid level.
Risk for the tenant they probably won't find anything for the same price, and high risk of not finding anything even for more, plus moving costs.

It's a two way street, with the OP currently in a lower risk then the tenant.

Not saying going top range just cause he can, but low-mid is fair. Prices are going up. That's the way it is.

 

I think a good tenant in place is worth a discount on market rates. It costs more money to install new tenants. However small increases get tenants used to them.

 

Thanks guys. I will talk to my property manager regarding increasing rent by $10-20/ week and see how things go.

 

Rent should be increasing every 1-2 years at a minimum by CPI, if the amenity hasn’t increased then outside of CPI during a tenancy it should not really change. If the market changes and the property would rent for substantially more the proper way to go about it is to let the Tenant know you’re ending the tenancy when due and going back to market at higher rent so as to not force it on the Tenant however if they would like to stay on at new rate or reapply at new rate they are welcome to etc.

 

A good way to curry some favour is to also let the tenants know they've been great and that's why you're only increasing the rent by a small amount

 

For VIC that's not possible anymore.
You cannot end tenancy for that reason.

You can only increase rent and the tenants either take it, leave it or fight it.

 

Sounds really unnecessary....why elect to end tenancy?

Did u know there is a pandemic on? Did u know housing security is an issue cos there is a rental crisis?

And u call it 'proper'?

Sorry I don't get it.

 

Yes, what are you doing about it?

What I suggested is an appropriate way to approach it. I didn't write the law, if you don't agree with it don't direct your offence at me take it up with your local MP.

 

So what?
When did any of the landlords / PMs around here became the COVID charity?

As it stands, IP owners already paid heavy price, mainly in VIC for COVID.
I personally lost good few months of rent, while paying full rates and everything on my IP.

If you wanna donate for struggling people, jump here and help her:
Carlzjsoda relief fund, organized by Michael Smith
She seems to be doing it rough, with the $60K she made within the last couple of days.

 

I’d put it up $5-$10. The reason for the small increase is that you don’t want to later be in a situation where you haven’t put the rent up in ages and then you need a large increase to get it in line with the market - this big increase might make the tenant move on. I doubt someone would move out over a $5-$10 rise. And I’d say it’s def worth keeping the rent on the lower side of the market to keep a good tenant. A bad tenant can end up costing you a lot more than $20 per week.

 

Agreed with the tenant above- tenants will appreciate you not increasing rents in small intervals by a small amount, but eventually when you're $50+wk below market and decide you need to revert, you'll be the worst person in the world. They won't remember the years that they've had subsidized rent, only that you're trying to apply a big increase to them now. It's really important to keep rent close to market value and have a Property Manager who can effectively negotiate that for you whilst maintaining the good relationship you have with the tenant.

 

I rent all my properties approx 3-5% below comparables. I start off with the assumption my tenants will respond to that by being reasonable tenants. It works most of the time very well and most tenants appreciate it and don't whine about small things and often attend to it themselves.

If my tenants become less than appreciative, I simply don't renew their lease and get new tenants.

It's been working well for me for the last 20 years. I'm not terribly interested in keeping top rental yeilds as I am in keeping good long term tenants to look after my assets with minimal costs and headaches.

Most tenants are switched on enough to realise the rent is cheaper than most places and they rarely hassle me for nonsense. And I gift really good tenants twice a year.

 

As someone else mentioned... nobody is going to move because the rent increased increased $5.

What every person faced with a rent increase will do however is fire up realestate/domain and check how the price compares (so better make sure you're at market value) and what else is 'out there'.

Last time I was in that position I ended my tenacny and upgraded as the value proposition was better despite the new property being more expensive. The orginal property sat vacant a while and relet for less than I was paying in the first place.

Depends what $5 or $10 is worth to you vs the status quo.

 

The age old question of 'should I increase the rent'. This question is usually posed by people with only one or two properties, where a small increase really doesn't make much difference to them, and they believe that upsetting their tenant will result in the tenant moving, which just isn't the case. There's no need to 'curry some favour', or keep it below market, or worry about them leaving, because if your rent is market rates, they've got to pay that anywhere else they go, so unless they were planning on going anyway, they will stay. It costs tenants quite a bit to move house, as well as the time & effort. They really don't want to move, just as much as you don't want them to move.

Many years ago now, there was someone wondering if they should put their rent up by $5pw and was told to 'not sweat the small stuff'. This is a summary of my reply.

$5pw might not be much to you. Over a year that is only $250

BUT if you've got 4 IPs that all need an increase that's $20pw, which is $1000pa

Say you've got 10 x IPs. OK, so $50pw or $2500pa.

You are talking about an amount greater than $5, so the numbers are higher. This is income that YOU can use. You are not a charity, you need to treat this as a business. Rents go up. You don't need to keep it low to keep a good tenant, as I mentioned above. Just keep it at market rates. That's fair for everyone.

 

Then you've probably got a several million dollar portfolio for which 2.5k may or may not be worth your while sweating over.
I dont have a several million dollar portfolio of anything, but the needle moving +/- 2.5k per year on my earnings is not something even I'm overly concerned about.

To be fair the OP claims a potential rent increase it doesn't mean much to him/her for reasons only he/she knows.

I merely suggested being sure of what market rents actually are as the tenants be promoted to at least make a cursory look.