How to increase rents in line with market

Two of mine have done that. Apparently it's a default setting in the property management software they use.

I would never understand how 'pure play' property managers even break even just on their rental roll. One company I use don't have sales side and employ 6 people (1 receptionist, 1 leasing manager, 2 property managers, 1 accounts person and 1 owner) and have around 200 properties on the rent roll. Roughly $375k in commissions with $300k payroll and once you factor in all the insurances, shop rental, fuel expenses, payment processing fees, trust expenses, advertising fees etc., they are barely breaking even if at all.

 

They are paying the payroll. Bought a job.

 

There's quite a bit of money in it....BUT....you need strong commissions and keeping the rents at market. Lease fees alone can be quite lucrative too. I'd suggest that using the default setting as far as emails regarding rents at end of lease would be a false economy, because if you keep loosing clients then they can't grow their rent roll.

 

I usually keep most of my properties just a tad under market rent. Keeps tenants happy and me because usually they tend to request less 'nonsense' fixing. Most properties I hold the wealth is in the CG, so a little rent loss in exchange for keeping good tenants is worth it. As long as it's not too under market rent.

Also before every rental review I spend 10 minutes per property to research rents. It really doesn't take that long and you'll get a good idea of what market rent is and how much you should increase by. If you let the gap become too far from market rent, you run into this delimma and the tenants become entitled and get used to paying the low rent, even if they know it's too low. So making a big change quickly with the same tenants is hard.

If a property of mine is significantly below rent, I'd just end the lease at the next renewal, do a small cosmetic reno and list it for market price. Short term pain for long term gain. It's gotta be done. You can't keep losing 20k a year.

 

i say communication is key. i told agents that come rental renew i will reindex to market rent (i was 15-20 below) and when lease was up for renewal i literally hiked 15pct. 4 of them that was renewed, all stayed on. in brissy and GC, house+unit+townhouse.

 

Rent reviews came up last week for some properties.

Increased rents for 6 properties ranging from 6% to 12%. All but 2 above 8%. All tenants accepted now. Small push back from 1 tenant was met with an email from my PM showing similar properties all higger rents. Tenants accepted.


Bring on escalating rents I say!!

 

We have a property in the northern suburbs of Brisbane where the lease was renewed back in April at $20 below market to a long term tenant. The lease is coming up for renewal in just over 2 months time and just in that short space of time the market rent in the area is now approx $550-600 (compared to $440 atm). While we're still okay with providing a small discount to market rent however this is still a big increase. We can obviously support or back up the increase with current rental ads.

Are landlords currently sending a no grounds notice to leave along with the lease renewal in the event they don't want to accept the renewal? Or would this been seen as retaliatory?

 

These actions all done at once is how you handle it:
1. Notice of Rent Increase (this happens regardless whether tenant agrees to a new fixed term, or it goes periodic)
2. Notice to Leave (without grounds), issued whilst tenancy is on a fixed term, explanatory note saying periodic tenancy not wanted, enquire about a new fixed term agreement or move on.
3. New fixed term agreement offered

 

Although my understanding is that a Notice of Rent Increase isn't required if going from one fixed term agreement to another? Also assuming it's been 6 months since the last increase.

 

Is the issue that you feel bad putting the rent up. We all do. But unfortunately that’s how it is. It’s pretty simple tho, all you have to do is tell your agent to increase the rent to what you want when it’s time to renew the contract. An extra 20k a year will help your guilty feelings subside quickly.

 

I do similarly so am a proactive landlord rather than reactive.
I compare the market, then ask managing agents for CMA, then try to keep the rent slightly under say 5-10%. Sometimes it may require $100/week increase but I justify with examples of next door rents or market rents and take the risk.
It also depends on economy so if rents are increasing and you do not increase then you really fall behind, so my reasoning is to be proactive and run it like a business.
Tenants are never happy with any increases, so for $10-$30/week increases I may increase slightly but anything above $50.00 I am willing to suffer the consequences, as mostly new rentals will justify such increase. So it's a balancing act of your numbers. Looking at my past history so far it served me well, did not have any major issues in re-renting if required.

 

We've had a lot of luck providing substantial increases a little below maximum market- it's key to call and discuss with the tenants in advance so they feel considered and understand the methodology behind the decision. Most people are aware the rental market is going through the roof right now.

 

Yes most of my rentals are increasing significantly even north of $100.00 per week....
What's disappointing though is that in the past rents kept pace with inflation but it seems in the last 10 years this has changed as per article below?
Inflation increase outstrips rent rises - SMS Trustee News