QLD Rental Increase - End of Fixed Term

Hi Everyone,

Just looking for some opinions. One of my properties has reached the end of its fixed term lease in Pacific Pines, Gold Coast (4211).

How do you make decisions on rental increases or remaining on the same rent? I always receive push-back from tenants through the property managers (obviously, who wants to pay more?). There's very little comps (in the suburb only 7 other 4 bedrooms sub-$500 per week). This particular property rents currently at $475 per week and another on the same street just rented $475 but is a bit smaller on internal area (same block size but mine is 2 floors vs 1 for the other).

Do you aim for rental increases every year (even if small) or do you generally just get comfortable with leaving it?

FYI this is the property. Needs some paint when it's next vacant.

Thanks for your input!

 

...surely the same way you figured out what to rent it for initially - market rent.

No point trying to increase the rent just for the sake of it if the market doesn't support it.

 

I find some agents recommend no increase without providing any supporting info such as a CMA. Not worth risking it for 7 or 8 % of $260 or $520 a year.

I generally always ask for at least a $5 a week increase. It’s less than a $ a day and saves the hassle of looking for a new place, paying for bond clean removal costs etc etc. if the tenant then really pushes back I will keep the rent at the same level if it’s not already under market value.

In my opinion too many landlords are set and forget, which suits some PMs just fine. Incremental increases each year can have a massive effect on cashflow and debt reduction over the term of an IP.

I bet you insurance, rates, maintenance costs etc. are all going up at much more that 1 or 2% a year.

 

It depends on the vacancy rate of the suburb and surrounding suburbs as well what's going on in the world. At the moment, we're nearing the end (hopefully) of the pandemic. It's still hard to get things done. I wouldn't risk my tenants moving out for a chance to get an extra $10 or $20 a week. Better off at this time to keep rent the same - unless you are very under market rent. That's the only time I'd consider raising the rent.

 

Actually acquired this one with a tenant already in place... I get your point but didn't think my question was that dumb.

That's what I'm worried about, that if I set and forget for too long it'll eventually become difficult to do a big jump. 4 bedrooms are going for much more in the area and vacancies still seem low, admittedly though this one is on a smaller block compared to other 4brs.

Thanks for your input.

 

Thanks, fair points. Hopefully over time I'm going to get better at this rental pricing game!

 

Thanks wylie. Definitely not an exact science so appreciate the input.

 

Rent increases are supposed to be directly correlated to market price, bearing in mind market price isn't always an exact figure.

I'm quite confident you can justify a rent increase on that house, and a good Property Manager should be able to manage the tenants expectations and pushback on this. They probably never had a rent increase before you bought the house so they're resistant to change, but managing that expectation is part of our job as the Property Manager.

 

At a minimum, annual CPI increase - which is justifiable, rarely get push back from Tenants using this approach. Otherwise you roll the dice if prepared to get new tenants if they don't agree and move on.

 

I’ve always been under the assumption that this is were a good PM can add value. So it doesn’t have to be black and white.

I always ask for an incremental increase but advise the PM I’m not willing to lose good tenants over it. I then rely on the PM to test the waters and if there is strong push back I may decide to not go ahead with the increase. If the tenants seem ok then I go ahead and ask for the renewal to be issued.

 

From PM point of view, more rent = more commission, but PM's knows the tenants best and generally knows when you can and can't push the increase, eg. straw that will break the camels back and force a good tenant to leave, which in most cases, is bad for business.

 

Although an increased commission on an incremental increase is not really significant is it? In fact in most cases I would have thought a PM would earn more in $$$ with a new letting few every so often. Although I agree I wouldn’t be happy as a client if my tenants were moving every 12 months.

What I’m trying to say is that I think a PM should still be able to test the waters prior to breaking the camels back.

Not trying to be smart just generally interested in how PM approach the situation and if there may be some out there who are too busy to worry about the extra work involved in ensuring a LLs return is maximised.

 

Don't get me wrong, 100% work for the owner, but every change over costs the owner money, time, and wear & tear from removalists whether it is apparent now or years down the track it all adds up like a slow burn. When you factor those in, a bird in the hand is usually worth two in the bush. As a PM-Business Owner I absolutely hate change overs, there is so much work involved (when you do it properly which I do) and that's also why the let fee is substantial because it is a lot of work. The product is rental accommodation - in that regard, less down time the better + best rent achievable, and ensuring other factors are maintained such as tenant looking after the place etc.

 

Unless the market really justifies an increase (difficult to imagine right now) be careful about putting up the rent.
Even raising the rent a small amount such as $5 will prompt the tenants to look at what else is avaliable as it raises the question of 'what are rents worth these days?'.
Once that mindset has taken hold they will possibly find the same type of property for less, or simply decide to move to a better property, even it costs more.
I second holding the rent the same unless you are absolutely sure an increase is justified.

 

Looking at the other properties for rent in the suburb, most are for future starting dates, which suggests a low vacancy rate. This is very different to other parts of Australia where vacancy rates are increasing and rents are being slashed. So an increase is possible.

From your tenants’ perspective you are increasing rent in the middle of a pandemic. This might annoy them so much they just move out.

 

Search: RTA median rent finder, gives you the median rents of a postcode, based on bonds lodged I think? Can select timeframe, units/ houses and no. of rooms etc. Good to see roughly where your sitting with your rents.

 

I can't see why the median rent is useful unless your property is a median property. Just look up comparables.

 

OP mentioned little comparables. Median rent can be useful to look back and see how much it has grown over the years to give an idea or some reasoning/justification behind an increase, not to use the actual median figure. you can even show it to the tenant to they understand why if they are stubburn