Hello all, apologies if this is the wrong section, I didn’t feel it fit anywhere in particular. my wife and I are in the process of buying a duplex on a single title with the intention of living in one side and having a tenant in the other. At this stage we will be using a PM to manage the rental and the current tenants (who is a lovely old lady) lease expires in October. The current very good tenant/future neighbour is currently paying about 30% below market rate and my dilemma is, do I raise rents closer/all the way too market rate (Perth rising market) and risk losing the good neighbour for a not so great one or do I keep it low. I guess this is a pretty personal decision but just wondering if there is any clear path I may be missing. At the end of the day this was an investment minded purchase. Any thoughts are, as always, much appreciated
Raise the rent and be extra selective in who you want as a tenant/ neighbour if the current tenant leaves. It’s not everyone who gets to choose they are neighbours with.
I have kept rent low for friends, knowing they don't have much buffer. It ended up that we got $60 more when we found new tenants. We'd increased by $20 not long before, so we were actually $80 below market. There were other reasons (beside our build, noise, dust etc), promised them a deck and that was held up nearly a year due to things outside our control. Had they stayed longer, we would have simply had to raise it more. However, we wouldn't have been comfortable raising it to market. Sometimes it isn't a good thing to know too much about the circumstances of your tenants. I'm not a hard nosed businesswoman, so raising rent for long term and/or good tenants is something I don't enjoy doing, hence we've ended up below below market many times over the years and waited til that tenant leaves to bump it back up to market.
If it is an investment then it's about numbers. Of course if you decided to subsidise a "good" tenant, then it is a choice but it is a cost too.
Arrange to have your PM do a pre settlement inspection, when the PM is there have them raise the issue of "current market rent" and let the tenant know what they might be up for in the near future Then try to find a compromise, market rent isn't everything, you are (in my experience) far better getting just a bit below market rent and having a good relatively trouble free tenant, as opposed to getting a little more rent and having to find a new tenant every 6-12 months with advertising costs and leasing fee's.
One of the upside of this type of neighbour is that they will generally be there long term AND less likely to be asking for a drop in rent when the market goes down. So do factor that in - how much is lease renewals worth and a tenant that in 2years time might still be happy paying slightly higher than market rent. I would investigate a place in between if they can afford that - a 10% increase from the current one?
Thanks guys, some very helpful thoughts to process. One other consideration I’ve had is that if keep current tenant, they know that the owners live a stones throw away, where as if we were already moved in and a new tenant came in they would be none the wiser. Is that something worth considering or a non issue if boundaries are created through the PM
I’ve been in that situation. I prefer that tenants do not know where I live and if I’m next door, that they do not know it’s their landlord. Brings up issues of the tenant’s right to quiet enjoyment, privacy, boundaries etc. Having said that, if you are in very good terms with the tenants and they are friendly, and you basically know and trust them, I wouldn’t have an issue with them knowing. With that arrangement you make it clear you can interact as neighbours but anything to do with the property needs to go via the PM.
I suppose I could take it as friendly neighbour and trust that they will respect the relationship, and if they don’t then I just wait out the end of the next lease and crank the rent up all the way to market value and start fresh with a new tenant
I think its super weird not to let your direct neighbour know that you own the property. Way to look extra creepy when they eventually find out.
What would make it extra creepy in your opinion? If I were to mind my own business (and hope they do the same) whilst letting the PM do their thing I feel that would be reasonable
We lived in a property that 2x 3bed homes on the one block. We never told the tenants that we owned both, but they always found out, plus the neighbours would tell them anyway. We found out that the tenants never really understood the PM relationship fully, so we were able to tell them that we'd signed our rights away, and the PM had full control of our property. We used that when we had people knock on the door, wanting to rent, who we knew were unsuitable. We'd always say 'Yes, of course you can rent it, but you'll just have to pop down to the Real Estate and fill in the forms'. Next call was the Agent, who we told that should XYZ apply for the property, the answer is 'no'. We also made them call the PM whenever there was maintenance, even if we did the job ourselves. We treated them like any other neighbour. As for market rent, I believe in always keeping rent at market rates. Many times I've heard investors keep rents low so they can 'keep a good tenant', but think about this for a minute. It costs tenants time, effort and money to move. It's very inconvenient. So long as you're not greedy, and charge 'market rent', they will have to pay that at the next place they go to anyway, so it might as well be in my pocket, not some other landlord. In my experience a tenant will not move because of a rent rise if they like living in your home. Here is a good example: We have an NRAS home, which has just come out of the NRAS scheme. The rent was supposed to be 20% below market, with Government incentives to make up for it. Anyway, as it's now a normal rental, we changed PM's and raised the rent $160pw. The PM had to do a little work with the tenant, because, as you can expect, that was a huge jump that he wasn't prepared for, and he went on & on about it being unfair & he would move. The thing is....when he looked at what was available he would have to pay similar for another rental anyway, so he has stayed on.
My approach would be, raise rent to near market, but ender by enough that she knows is getting a good deal & not worth leaving. I would not worry about hiding you own it, they will find out & how would teh conversation go on a Sat morning when rent is raised and she is venting to you about the ass LL, do you have a poker face ? I cannot see how you wont get visited when some things go wrong, but, even if it was an owner, elderly woman is likely to knock on door anyway with some things, I never minded helping out an old widow across from my home years ago, and no one came to our property without us being told, it was like a free security policy I think using an agent helps keep it sort of at arms length, but it depends on how business like you can be, some people just cannot do this and the tenants take full advantage.
The creepy part is where you're pretending you don't own that property. You can mind your own business and let the PM do their thing without being weird about it.
You could tell the tenant that your twin brother owns the property and that he married your wife’s twin sister. And that explains why the kids are similar. So if the tenant knocks on your door wanting something fixed you just tell him you’ll get the twin brother onto it. You then change shirt, wait an hour and then visit the tenant to remedy the problem. The tenant may become suspicious when he say “hey, how come I never see you and your brother together at the same time?” So I don’t know how long you could keep this charade going.
All twins have a binding agreement to never be seen in public together. But share social media etc so they know exactly what is happening in each others lives at any given moment. Come to think of it, if OP sticks to original idea, when they find out they are the owners, that should be enough to keep them away.......or get fire bombed or attacked perhaps ?
