Rent Increases

My father owns a rental property in Sydney's western suburbs. It contains a 2 bed house to the front that we rent out, and the family business that runs out of factory that my great grandfather built behind this.

Traditionally, we have long term tenants in the house that come in at market rental values, that then tend to live there for years with little or no rental increases, not ideal.

I was chatting to the managing agent a few weeks ago and they suggested the property was massively undervalued in terms of rent @ $310 a week. They suggested a 2 bed unit in the area is renting for a minimum of $350 and a 2 bed house @ $450.

I've had the rent put up to $330 and suggested that we need to bring it up to market values, which the agent agreed with. The current tenant we're happy with, and has been there for years so doesn't have a current lease. What are people's thoughts on fair and reasonable timeframes for incremental rent increases to get us to market value rent. I suppose in my mind that is somewhere in the $400-425 mark because of the commercial premises behind but would need to take the advice from the managing agent.

 

Where abouts in western sydney?

 

You can do it every 6 months, but really your agent should advise you of the best way of going about this as they should know what is happening in the local area.

 

thanks!

 

In some States, there is a "minimum notice" period to putting rents up. Something to look into.

 

Offering tenants a "pathway" for the rent to increase to market value in the next 12 months can also mean they'll start looking elsewhere. Might as well get new tenants in right away. A lot depends on your tenant and the agent.

 

Good tenants and current rental value are not mutually exclusive.
Why not put it up to just below market value.

We establish rent increases with comparables in area.

The tenant won't leave if the property is at the correct rent or just below, they will be paying that elsewhere anyway.

 

There is a fair rent increase index that will tell you how much you are allowed to raise rents at any one time and how long between you must wait to do so again. Definitely try and bring rents up to market rate, but tread carefully and make sure you do it correctly.

 

ACT has Tenants' Union ACT Inc. - Rent Increases: Is my Increase Excessive? which essentially just uses CPI.

Most other states you can increase by any amount you like, as long as the end result is still justifiably market value in line with comparable properties.

 

Would you stick with $340 rent on 1yr lease in redbank plains due for renewal Jan 2016?

I looked at comparables for a 4x2x2 house and they are $330-$360, agent suggests hold. Tenants been there for over 18 months i beleive.

Thoughts?.
Thanks
Ted

 

I'm not overly familiar with that suburb so perhaps check with someone who is.
However, I did a quick browse of it (excluded all the ironfish listings) and it looks to me like there's scope to go $345. There's $250 per year you could be making; tenant is unlikely to move out over that amount.

 

Exactly, that is what I told my pm to do recently

 

We get heaps of properties from private landlords especially, with rents being very undervalued and there is only one reason - "they are good tenants" on further investigation, they usually not even good tenants. Good tenants pay fair market rent - and on time, and look after the property, and give property managers chocolates at routine inspections

 

I was thinking along those lines, there are quite a few rentals within 3-5km radius of my property and I thought also to avoid advertising fees etc might be best to leave...hmm or do a 6 month lease to see how market is?

 

I'd rather increase it than offer a 6 month lease to an 18 month tenant. I'd prefer to reward them with longer leases to give them stability.
In Queensland you can increase every 6 months - perhaps keep it as is this time and review in 6 months, that way you get both scenarios covered in a way. I'm assuming agent gave you market justification for their advice?

 

Xenia you are absolutely on the right track, my pet hate is weak PMs that buckle and not working for landlords.

I ask for reviews and up the rents accordingly, resi yields are not brilliant generally, if pm is not managing this side they are either lazy pm or inexperienced or both, either way they are not doing their job properly.

MTR

 

all of our landlords get CMA (comparative market analysis) reports when we think rents should be reviewed - we don't always suggest an increase but whether we do or not, we back it up with statistics and data - that's the scientists in both Angelo and I - stick to the facts, stick to the stats.

 

This is huge, income is important, and keeping rents at market value helps us manage our investment, it's not a charity we are running.

I crack up when I am told landlords don't raise rents because they have the best tenants in the world.

Is this a joke, my bank does not reduce my mortgage because I am a great client

 

Good point

The agent recommended to keep rate the same for 12 months, but no data or reasoning was supplied from memory.

Seeing there on the ground i tend to agree with them after looking at comparables.

Anyone else have IP in R/PLAINS?

 

@Teddy given the RBP median rent is $330, I guess $340 for one year is great:



Source: Corelogic/RPData website as at 14/12/2015