Should I renew lease at lower rent?

We own a property in Oxley, West Brisbane. Currently tenants have been there just over a year. We agreed to a 20% rent for 3 months due to covid hardship (Apr-June). Lease is due for renewal in Sept. Property mgr has been in touch saying tenants would like to renew for 12 months at the same rent.

My initial thoughts are that I don’t want to lock in a 20% rent reduction for effectively 18 mths (Apr 20 to Sep 21). This was supposed to be a short term reduction to help tenants through a sticky patch. Tenants have said they are hoping business will improve over coming months but I’m concerned about ongoing job security risk. Plus if expecting business to improve, feels like asking for a 12 mth renewal at reduced rent is taking advantage.

So wondering whether to terminate lease in September, do some upgrades to attract better quality tenant. However, don’t have current view on market and how likely to be able to relet.

Any thoughts on above approach or local market intel. Based on current listing it’s looks like current rent is below market but not a lot of stock available...

Thanks

 

Why don't you have a chat with your agent to find out the state of the market. If the tenant is a good tenant, you could offer them a lease at the original rent. If they wont do this, they can leave & you can set it back to market rents.

 

Agree totally. Also remember that it costs a tenant at least $1000 to relocate (when you factor in removal costs, changing utilities, overlapping rent etc) so they are unlikely to want to move.

 

It may cost you more than it will cost the tenants if they leave, especially if you end up with a vacant period which you likley will for at least a week.
I recently moved myself and a cost a total of $210.

Keep the previous reduction due to hardship as a separate issue and reset at current market rates - be realistic with what that is at the moment.
There is cost and risk with signing any new tenant which may or may not be worth making up the shortfall for.

 

Rents in the area haven't moved and many industries are back to business as usual. The 20% reduction you gave them is in response to a crisis.

To be quite frank, I'd be insulted that your Property Manager even asked you to consider the 20% reduction for another year, unless there was some solid market evidence backing it up (which there wont be, unless you had the property dramatically overpriced).

I had a tenant who we reduced rent from $310wk to $250wk during COVID and he was cheeky enough to ask if he could re-sign longterm at that rate. No. Once your work goes back to normal, so does the rent. If you don't like it, move and we'll find another tenant within two weeks at $310wk.

I would stand firm that the reduction ends in September and the lease renewal will be offered at the original rent. If they leave it sounds like an opportunity for you to make some improvements, or just re-rent as normal.

 

Also, @Simon Hampel should this thread be moved?

 

Here's the go from a Property manager in the area. I'd take this advise if I were you, and if your current PM can't handle it, you need to change agencies.

 

Just looking at SQM:

For 4075, all houses, rents are down 4.5 per cent for the quarter and 15.2 per cent for the year.

 

Those stats seem odd. It suggests rents fell 10.7% in the first quarter when the Brisbane market was doing really well, then only dropped 4.5% once COVID hit?

 

id be insulted too,
I guess they could just be asking for the sake of it, in the hope the owner agrees,

start low and negotiate up!

 

It sounds like your PM is on autopilot (it happens)

Just sign it over to @Tom Rivera to either negotiate a deal or find you market rent. He manages all of ours up there.

From what I see Brisbane has not had the same impact as Sydney on rents at this point

 

I find the SQM data for individual postcodes can be quite volatile due to changes in mix of the size/quality etc of the properties for rent. Better to look at the data for a bigger area su h as region.

Don’t know that market but rents have fallen in Sydney; 20% down in lower north shore over three years.

 

Rents in expensive or tourism areas have definitely been hit, while the more affordable areas are holding dead steady. Oxley is on the affordable side of things, though not to the same degree as somewhere like Logan or Ipswich.

One of my offsiders is looking to rent in Surfers Paradise right now and they seem to be in freefall- he's ben looking at places for $350wk that were $450wk last year...! On the other hand, we've even been able to increase some Logan rents when re-leasing in the last month or so.

 

Can you rent for the normal amount but offer a 20% discount for 3 months, then 10% for the next 3 months, then 5%, etc? Give you some certainty that rent will go back to normal while transitioning the tenant back slowly so no bill shock.

 

The OP hasn't mentioned what kind of property or what price range. Here are the current rentals available between $200 per week and $400 per week for comparison.

https://www.realestate.com.au/rent/...ncludeSurrounding=false&activeSort=price-desc

 

I think the OP is long gone. The opening post was his first (and last) post since 2017.

 

fx hedge was last seen:
17th Jun, 2020
youd think you actually check your thread for more than a few hours after posting, before disappearing

 

17 June 2020 was the same day he made the OP so maybe he hasn't come back to check yet

 

I've got 2 in Surfers and have managed to increase rent on one recently. I think your offsider is looking at high rise units because they're the ones that usually have a hard time renting with so much competition. My 2 are in walk ups in Peninsular drive, 12 packs, no lift, no onsite manager etc. Never had a problem finding tenants for them. As an investor the trick is you have to select a good building in a good location with add value potential and low outgoings.