Rental Increase - Do you negotiate with the tenant ?

Discussion in 'Property Management' started by Tonibell, 3rd Oct, 2017.

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  1. Tonibell

    Tonibell Well-Known Member

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    Hi Investors,

    I would be interested in property investors from property chat their opinion on the following issue.

    I have had a rental property for about 10 years with a standard 1960's weatherboard house, three bedrooms, one bathroom, one single lockup garage. It has been a real cash drain on our finances. It has only been over to last couple of years that the property is finally breaking even, by building a granny flat, totally separate entrace and fenced off from the main house. I cant complain, the capital gains has been good.

    The issue I have is that each time I increase the rent on the main house by a small amount (say $5.00 or max $10.00), the tenant starts to negotiate. I get the impression that the PM is intimated by the young family, they are a professional couple with two kids. I have to constantly hold my ground showing the facts of the rentals on the various websites. I have also made sure that all maintenance is done promptly.

    I don't have this problem with my other properties, just this one. Has this something to do with the following:-
    1. Tenants from middle income areas will push back.
    2. The Real Estate agent is not reliant on their Property Management fees anymore to survive in business, as they are can survive on the commission from the sales side of the business. Hence not interested in pushing through rental increases.
    3. Property Managers unable to cope with the educated tenant.

    Property Chat's opinion would be greatly appreciated.
     
  2. Kassy

    Kassy Well-Known Member

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    I had one tenant that would always try to negotiate, I knocked it on the head with my PM. It's up to them to know the market and set the rent and then advise me as the owner what to set it to and then manage the tenant. That's where it's stops for me.

    If there is a negotiation is the PM getting it wrong as to reading the market?
     
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  3. thatbum

    thatbum Well-Known Member

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    Is there an issue with the negotiation?

    I have it sometimes happen from tenants. It just seems that some tenants will do it and some won't - I don't see much pattern between the types of tenants that do or don't.

    But it doesn't really faze me when it happens. I make sure I have an idea of the market rent and just make the decision on what I will offer or walk away from.

    Shrug.
     
    Last edited: 3rd Oct, 2017
  4. Tonibell

    Tonibell Well-Known Member

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    Thanks Kassy, I totally agree with your comment.
     
  5. jins13

    jins13 Well-Known Member

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    Sometimes it's better to just have a good tenant that's going to pay their rent on time. Just today, I requested my managing agent to issue two termination notification to two of my tenants due to paying the rent late all the time and they've made no attempt to communicate with the PM. At the same time, by them leaving, I am increasing the rent by $10 each property due to market value and what other properties rented out for in the area. If there's no response from the potential renters, will decrease the price.
     
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  6. jprops

    jprops Well-Known Member

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    I'm a tenant. I push back even if I know it's reasonable. That's just good money management.
     
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  7. qak

    qak Well-Known Member

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    Our PM pushed for an increase last time on both places - a quick review of what other rents were in the area and I said - no, would much rather keep the tenant! In our case the PM probably would prefer a new tenant for the week's letting fees.

    Previously, our PM have told tenants trying to negotiate, to prove why they should pay less (ie via similar property listings).

    On the topic, if anyone knows a good PM in Sydney Eastern suburbs, please let me know the details. The current one is not attending to matters as he should be :mad:
     
  8. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    Set the price and make it clear its not negotiable.
     
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  9. D.T.

    D.T. Specialist Property Manager Business Member

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    Certain demographics like to negotiate like its a national sport. Just need to be more assertive. Should always be striving to receive the best possible result. Go as far as saying "sign the renewal (with increase intact) or a exit form will be next."
    This is why PM only agencies can shine. There's obviously other pros and cons too, but you know they need PM fees and therefore need results from their clients that conclude in that.
    Then you shouldn't be trusting them with your asset I'm sorry. Most tenants are educated these days. With the advent of social media, lots of people are spreading their information rapidly.
     
    Last edited: 3rd Oct, 2017
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  10. SeafordSunshine

    SeafordSunshine Well-Known Member

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    I had some 'educated tenants'
    I instructed the agent with a market appraisal , 60 days notice of increase and a lease offer 'below market' and they still pushed back.
    I said No and if they don't agree by xx date they were given notice.
    They asked for a new lease with my terms and conditions 2 weeks after my xxx date.
    I said no, asked them to go and haven't looked back.
    1. Check market rent/ comparables.
    2. Check vacancy factor
    3. Check letting fee
    4. Check advertising fee.
    If it falls into 'your favour' then move accordingly
    I hope this helps
     
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  11. hobartchic

    hobartchic Well-Known Member

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    Given the age of the property it seems to me to be fair that it would be offered at below market rent. Why would someone pay the same for an old house, even renovated, as a brand new house with better insulation etc. Maybe it is time to sell? As you say, only breaking even recently anyway. If you are not happy with the PM consider changing but I would also value people that look after your property who should also pay under market for being decent people.
     
  12. neK

    neK Well-Known Member

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    @Tonibell
    Kick them out
    Renovate
    Rent out for more.

    One of my places was somewhat run down... rented for $460 up until late last year.
    Did a reno (about $40k) - New bathroom, knocked down some walls, repaint walls / ceilings / window frames, repolished floors etc.

    Current leased at $600 per week.
    Increase works out to be 18% based on the $40k amount... almost the same as building the granny flat!
     
  13. Anthony Brew

    Anthony Brew Well-Known Member

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    That's fantastic.

    I wonder if my 1980's built 1-bedder not far out of Syd CBD would be worthwhile to paint or do something but I have no idea where to go to find this out since I am so new to property investing and never lived in any nice renovated property before either. It isn't bad or anything, just ordinary and I always wondered..

    It seems that renovated similar apartments do go for quite a lot more than what I am getting, so I'm jealous of that.
     
  14. MWI

    MWI Well-Known Member

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    Sometimes I have found out we need to manage our 'managing agent'!
    I don't know the reasons but if I were you I wouldn't concentrate on the problem instead I would focus my attention on the solution.... What outcome do you wish to achieve then pursue the solution!
    Sometimes we spent 'major' time on 'minor' things, right?
     
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  15. dabbler

    dabbler Well-Known Member

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    If they do the same, and it repeated each time, go up by 20 and allow them to negotiate 50% off, win win.

    I find many agents are more interested in keeping rent same, so they can avoid turn over, inspections, re leasing and have the tenants on side. You know the places for sale you see where rental income has been same for a decade ?
     
  16. jprops

    jprops Well-Known Member

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    I assume the market appraisal would factor in the age of the house. Market rent != Median of suburb.
     
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  17. Fargo

    Fargo Well-Known Member

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    Market rent would be for comparable houses of course. You should not have any-one who is not decent in your house. If you want to be charitable maybe give some money to the Salvos. I don't think you should want below market rent simply because people are decent. Almost every-one is decent. If every-body rented below market rent eventually rates would go so low would have to pay people to live in your house.
     
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  18. Chivaun.Shortis

    Chivaun.Shortis Well-Known Member

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    I understand where you are coming from but if it is a $5 or $10 increase are you giving them a 6 month or 12 month lease. If it is a 6 month lease I can understand the negotiation as they may think that you are only going to increase again in a further 6 months.

    Some of my owners give tenants an option no increase for 12 months or $10 increase for 6 months or vice versa depending on what lease term they are really wanting
     
  19. Zoolander

    Zoolander Well-Known Member

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    Problem is that some landlords are tender snowflakes and see rent negotiations- like having to do critia maintenance- as too hard and opt to get a new tenant in who won't complain.

    Its no way to do business, but thats reality. Probably linked to those horror landlord stories floating around Domain
     
  20. hobartchic

    hobartchic Well-Known Member

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    I was not implying offering charity rates but a Landlord may benefit from a slightly lower rent than newer properties to stay competitive in their market which is better business sense than having it left vacant for a long period of time. As for almost every-one being decent...well, I hope you continue to find that but it's a little naive in my experience.
     

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