Join Australia's most dynamic and respected property investment community

My future tenant's fate....

Discussion in 'Property Management' started by htopg, 28th Oct, 2015.

  1. htopg

    htopg Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    202
    Location:
    Sydney
    Just bought on an investment property in a view of subdividing it.
    It is not yet settled.
    Currently tenant is paying $580/week with water included since 2012.

    After settlement, this is what I will do and potential reaction from tenant.

    I will increase the rent to market rate $620
    Tenant: Ouch! That's an additional $40 per week

    I will start charging for water usage
    Tenant: Ouch! That's another $20 per week

    I will start cut down trees in preparation for subdivision
    Tenant: Ouch! My enjoyment of shades from trees will be gone and I have to bear the noise of cutting down trees!

    I will demolish garage in preparation for subdivision
    Tenant: Ouch! Where am I going to park my car?

    I will fence off half of the backyard in preparation for subdivision
    Tenant: Ouch! My enjoyment of backyard will diminish by 50%

    I will construct a new house at the new lot
    Tenant: Ouch! I have to bear the noise from construction for 12 months!
     
  2. Biz

    Biz Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,475
    Location:
    Sydney
    Don't forget to send them a couple of movie tickets and a bottle of plonk for xmas.
     
    wategos and htopg like this.
  3. HUGH72

    HUGH72 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,124
    Location:
    FNQ
    I think you most likely will be looking for a new tenant first.
     
    TMNT and htopg like this.
  4. wylie

    wylie Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    2,961
    Location:
    Brisbane
    I would think the last three items cannot be done without consent from the tenant unless you write them into the new lease. You cannot just knock down a garage that is currently part of the lease, nor fence off half the yard.
     
  5. htopg

    htopg Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    202
    Location:
    Sydney
    Yes, that's one of my plans.
    For the new tenant, there will be no garage, half the backyard, no trees, and need to pay water rate.
    Construction noise? Err.. that's from neighbour.. ;)
     
  6. htopg

    htopg Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    202
    Location:
    Sydney
    Another potential scenario (tenant is a good negotiator):

    Me: I will increase the rent to market rate $620
    Tenant: No! Keep it at $580
    Me: OK...

    Me: I will start charging for water usage
    Tenant: No! Include it in the rent
    Me: OK...

    Me: I will start cut down trees in preparation for subdivision
    Tenant: No! Unless $50 off for the week during which the trees are cut down
    Me: OK...

    Me: I will demolish garage in preparation for subdivision
    Tenant: No! Unless dropping $50 rent per week ($530/week)
    Me: OK...

    Me: I will fence off half of the backyard in preparation for subdivision
    Tenant: No! Unless dropping $50 rent per week ($480/week)
    Me: OK...

    Me: I will construct a new house at the new lot
    Tenant: No! Unless dropping $50 rent per week ($430/week)
    Me: OK...

    So at the end the rent might be at vicinity of $430/week.
    I think I will just move in there and bear all the inconvenience :(
     
    KayTea likes this.
  7. htopg

    htopg Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    202
    Location:
    Sydney
    Yes, existing tenant have seen all the goodies and it is hard for them to sign up a new lease without dropping rents.
    It is better to get a new tenant who has not seen those goodies :)
     
  8. htopg

    htopg Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    202
    Location:
    Sydney
    Second thought...
    If I succeeded in all of that, there will be a very high chance for me to appear 60-minute or A Current Affair show ;)
     
    legallyblonde and larrylarry like this.
  9. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,595
    Location:
    Adelaide, SA
    I think the first 2 are very reasonable. There's no limit on the amount you can increase rent, as long as it's market value afterwards.

    The others though - you'll need to soften the deal for them to do those things, possibly even go back further than the above.
     
    htopg likes this.
  10. bob shovel

    bob shovel Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,385
    Location:
    Somewhere in the land of Oz
    Ahhh you must be my new landlord.... Good luck buddy I'm not that easy. you were right about the a currant affair show though ... I'll be squatting in your house stripping out every bit of wire and copper I find plus smashing some windows and the faecal matter will be off the chart! Tracey what's her name will be ill on live tv

    ...nice to meet you :D
     
    htopg likes this.
  11. Mumbai

    Mumbai Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    763
    Location:
    Sydney
    Tenant agrees to the increase in rent and ready to pay water usage.
    You demolish the garage.
    Tenant stops paying rent altogether unless you reinstate it.
    Ouch ouch ouch ouch

    Not long ago you were all compassionate for a landlord and a tenant misusing them. Roles reversed??
     
    htopg likes this.
  12. wategos

    wategos Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    336
    Location:
    NSW
    Man that makes me cringe when people say they do that.
    Its like giving the waiter a 10c tip.
     
  13. htopg

    htopg Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    202
    Location:
    Sydney
    I am just doing potential problem analysis and realised that it will end badly.
    On top of that, my new tenant bob shovel has identified me as his new landlord and he is going to do something to make sure there is still justice in the world...
    Now I am convincing my partner to move to that house with me and enjoy the diminished backyard, demolished garage, and 12-month construction noise :D
     
  14. Xenia

    Xenia Adelaide Property Manager Business Member

    Joined:
    21st Jun, 2015
    Posts:
    2,347
    Location:
    4/136 The Parade Norwood, South Australia
    Decide what you are actually GOING to do and make it a condition of the lease. Tenants do not normally negotiate prices etc they just move onto the next property that is easy.

    Clarity will prevail here.

    Make it clear - Market value is $600 but we are discounting by $50 due to subdivision. (or whatever it is)
    the fence line will go exactly here............
    garage will be lost
    you are free to enjoy back yard and garage in the mean time.
    construction is likely to begin on this day......
    tenants pay for water - no negotiations, why even bring this one to the negotiation table when you have so many other variables above.

    Keep it simple, keep it CLEAR. If you add even an iota of confusion here and go back and fourth you will cause yourself vacancies in the property and possibly compensation payments to the tenant.
     
  15. Perthguy

    Perthguy Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    4,776
    Location:
    Perth
    @htopg I have the same potential issues. However, my development will sole some of the tenant's complaints, so I guess it is a bit of inconvenience for a good outcome for the tenant? Anyway, the yard is too big and took much work to look after and he wants a small section around the house fenced off. Done and done. Not sure he will like all the construction noise though. I will possibly be looking for a new tenant.
     
    htopg likes this.
  16. vtt

    vtt Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    254
    Location:
    Inner West, Sydney
    Why don't you have a chat with your PM, let him/her know what you are going to be doing to the property and have them make an assessment of what would be reasonable rent for the property with only half the backyard, no water rates included, no garage etc. then deduct a bit extra for the renovation noise and inconvenience. I would then approach the tenant (via PM of course), let them know of the plan and the new rental offer which will be effective on X date. If this doesn't work for the tenant then they (or you) give notice, if it does then they sign a new lease filled with the conditions and then it's happy days.
     
    htopg likes this.
  17. spludgey

    spludgey Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    688
    Location:
    Sydney
    If you're going to be sneaky about it, then it would go against my number one rule in life: "Try to not be a dick."
     
    Kael, wylie, htopg and 2 others like this.
  18. HD_ACE

    HD_ACE Game-Changer Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    449
    Location:
    Perth
    Just go about it properly. This is how I went about it on my latest one.

    Inquired if tenants intend to renew lease. Yes they did.

    Offered a new fixed Lease at the same rate with a clause stating I would take possession of the extra land some time during the Lease with 2 weeks notice. Also stated sheds, fences, clothesline, carport, pergola and driveway would be removed and new ones constructed in different places.
    They signed on the dotted line. I was prepared to lower rent if needed.

    Done properly and legally with no disputes. And were great tenants. Keeped an eye on the new build, took photos of people stealing from my site and caught people trying to access the building. Also helped me in determining how badly the builder was lying to me about progress and quality. Caught them out a few times especially on their time frames.

    So was an all round great outcome.
     
    htopg, wylie and Perthguy like this.
  19. htopg

    htopg Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    202
    Location:
    Sydney
    Dick Smith won't be happy about your number one rule in life....
     
  20. Liela71

    Liela71 Active Member

    Joined:
    4th Oct, 2015
    Posts:
    26
    Location:
    Narellan
    My neighbours have a simulate scenario.
    House has been rented to great tenants for the last 2.5 years at close to market rent of $430. Landlord puts up rent by $20 and send horrible letter to tenants staying you haven't paid your water bill 6 months ago, with threats to collect. This followed with an oops letter our computer system made a mistake.
    Great tenants say bugger it and assess whether they can borrow to buy elsewhere, they can, they give notice, they move.
    House stays empty in a reasonably high demand area for 13 weeks because rent gets put up to $450, oh by the way we are going to build a granny flat, so one of 2 garages will be lost to you (the asbestos one) and your average sized yard is being cut in half.

    $450 x 13 weeks $5850 for the sake of the original $20 per week.

    Oh and the three cars with P plates parked over the grass (couldn't possibly use the driveway) in front of the house is likely an indicator of the desperation to finally rent the house out.