HI All, given the changes to tightening credit from a macro perspective, and the fact that values have risen etc. and the nitty gritty rise in interest rates, generally have we all considered increasing rents etc? As alot of us over the past 24 months started a shift towards debt reduction/cash flow yield plays, i personally am looking to re-engage my property managers and begin the discussions of rental increases to come back in line with the market, and the overall increased costs of holding property. thoughts?
Regardless of what is going on with interest rates, your trades etc will cost more each year. Accordingly it is best to creep the rent up a bit each year provided that the comparable rental prices in the area support your pricing. If you hike it to a value that is not justified and your tenant takes you to tribunal, you'll have yourself a problem. If you are offering the property for rent to a new tenant, you can ask whatever price you like, and if someone is prepared to pay it, then great. The same rule does not apply when hiking rents on a sitting tenant.
The above is irrelevant. Unfortunately rents aren't correlated with holding costs and outgoings. What is the market willing to pay for rent? They are dropping in my suburbs, about $50/so. Would be a good idea to call 2 or 3 agents, and ask what the going rate is for x bedroom y bathroom properties in your area. At best you can push slightly above market $5-$10, as the tenant will realise the cost and inconvenience of moving out isn't worth it. I would not condone the above action though.
I thought most would generally work out those numbers prior to purchasing property, based around repayments, yearly running costs and incoming rents. Or did many just assume the loans were always going to be IO and never bothered with looking at the numbers for incomings and outgoings based around P&I repayments.
Seriously , you generally work out those sort of numbers prior to buying property. Scenario 1 = IO Scenario 2 = P&I. At some point the party of easy money was always going to end and many loans would revert back to P&I.
When I consider the cost of finding a new tenant. I think a good in place tenant is worth a discount on the current going rate not a increase but ymmv
I try to up the rent at the end of every lease. I check REA and Domain plus RTA (Qld) then have a meaningful conversation with my PMs. If you own say 10 x IPs, then something simple like $5 pw per property means $2,600 extra cashflow and $65,000 to my Net Worth using a capitalisation rate of 4%.
No. In the past IO loans could be extended for 10/20 years. So no . The OP was actually not even about that. It was can I lift rents in current climate? I don't see anywhere where the loan structure was in question or if OP was asking for financial advice.
The only relevant part of that sentence is “to come back in line with the market”. Costs to you are irrelevant. How many landlords reduced rents when interest rates dropped? If your rents have fallen below the market then by all means review them. This should happen anyway whether your costs go up or down. Marg
It's an interesting discussion. I've always been a 'rentvestor' and earlier this year we had our PM (where we live) try to increase the rent by $50 p/w and try to use the line "we usually increase rents every year". I politely tried to point out that saying things like that only show how little she understood about market dynamics and attempted to negotiate a $15 p/w increase saying that was more than fair in the current market. Her and landlord disagreed and said they would probably get a $70 p/w rise on the open market and if we didn't like it, we were free to end the lease. It deteriorated quite quickly as we both stood our ground and we ended up moving into another apartment in the same building (which was superior in a few ways and one of my comps). Seven weeks after we moved out she rented the apartment out for the exact same price we were paying when we left. Markets can move in mysterious ways and I don't believe there's any point in trying to make assumptions or predictions on which way rent is going to go in the short or even medium term. Buffers should be in place (cash flow and cash) and all we have to do is make sure it's enough to ride it out. If it goes up, great - but be prepared for the other way. As one of my share trading friends once said, "I don't create the waves, I just ride them". Cheers, Andrew
So they lost 7 weeks rent plus cost of finding a new tenant who may or may not end up being a good tenant. So really they are about $50+ week worse off for the next year. Did you ring PM and congratulate them for getting a good deal for there client?
are you base in Sydney? the vacancy rate is on the up and soon will past Brisbane. Their agent so have been aware of this and try to talk them out of it.
If you could... you should...one would... but can you? Rents are totally agnostic to what you holding cost is, it follows supply and demand ...very very closely. So be-aware of your competition else it can fire back.
Yes, I live in Sydney and yes, I agree and tried to point this out to the agent but she didn't want to know and neither did the landlord. Interestingly, the landlord is also a Buyer's Agent who should have known better. Together they couldn't have been less professional and less knowledgeable on market conditions and they paid a heavy price for it.
Yep - 7 weeks rent, plus the letting fee, plus the time cost of the agent to drive across Sydney multiple times for multiple (futile) opens before they dropped the price from their la la land aspirations. Not to mention we were willing to pay $15 more per week than they ended up getting to avoid the move so technically they're behind by that amount per week x how many weeks over the next few years where they won't be able to catch up? Thousands of dollars in the hole as this is a nearly 4 figure per week property. I will be using it as a case study for future clients on how not to put up the rent!
With rental vacancy at all time high and keeps growing, now is definitely not the time to increase rent if your investment is in Sydney. If you have good tenants, you consider trying harder to keep them happy by keeping your property well maintained and give them Christmas vouchers or cards. It will soon be a renters market SQM Research - Residential Vacancy Rates
