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!
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.
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..
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
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
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
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.
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
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??
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
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.
@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.
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.
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."
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.
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.
