(WA) Ensuring one doesn't get tenants who plan to break lease

Hello,
Looking to rent out a property long term in a town that has higher rent in one part of the year, lower in another. Trying to ensure the tenants don’t say they will lease for 12 mths then leave after 6 and are heavily penalized if they do (people are trying to do this due to lack of properties). It causes me a lot of issues even if they don’t screw me over with the break lease costs (which is always possible especially it likely will be many thousands, eg several hundred $ pw x 6 mths). Being self managed they wont even be hit with a pro rata letting fee for all my wasted time reletting.

Some ideas I have are:

1. Do two leases (or a lease with two different rental rates), 6mths at a higher rate then 6 mths at a lower rate.

2. Do the lease at a higher rate with the last x weeks “Free”. Ie same rent over the year but its pay it all over the 1st 10-11 mths.

Any comments on these ideas or other ideas appreciated.

Before anyone makes the comment, yes happy self managing, don’t want an agent Also i know best way to avoid any issues is to select the right tenant, this is just a backup

 

I'm confused - why would a break lease screw you over in your scenario?

 

You have to conform to The Residential Tenancies Act of WA. Of the options you have given me the only one that would, is for you to sign the standard Form 1AA Residential Tenancies Agreement for 12 months with a rent decrease after 6 months.

 

I don't think I've ever had a tenant break a lease within the first 12 months (I've been investing since 2000). A few tenants have moved on after 12 months, most are 2-4 years. One tenant stayed for 14 years, another couple has been in place for 8 years now.

Worrying about tenants breaking a lease is not worth the effort. Just roll with it.

 

Add the 2 rates [higher/lower] divide into 2 and the rent remains the same all year ...

 

If this matches the reality of the market then probably a good idea, so long as it complied with laws in your state.

 

2. Do the lease at a higher rate with the last x weeks “Free”.

This is the option I would choose and it is certainly something that I have used in the past. ie offering say 2-3 weeks rent free period after 12 months.

The advantage is that you can demonstrate to a potential tenant that the "equivalent" rent is actually lower than the actual rent if the tenant stays the full term. Also, if they decide to renew, the rent (after free period) is already at the higher level, so no need to justify any increase.

Furthermore, if the tenants do break lease and leave, they are still bound by the RTA break lease conditions, but you are not obliged to honour any "free" period.

 

1. Reletting costs me a lot of time which im not paid for (unlike if managed i cant claim pro rata letting fee)
2. Its harder to find a good tenant in the off season.
3. I want to rent long term, if i wanted to do short term i would (more money but more stuffing around)
4. Perhaps im on holidays at this time.

 

If the house is in a place where for 1/2 the year there are 50x more ppl looking for a house its an issue. Renting a place just for the season only maybe 50%+ in rent. Unfortunately some ppl will lie saying they will stay long term when thy only want to stay the season. Obviously some will pay the lease break costs (which could be many times the bond perhaps remaining 6 mths maybe $1-300 pw less) but some will just bail leaving big debt which is a pain to chance. The idea is to to to discourage this type of person. 14 yr tenant is what i would prefer

 

Very fair points. Even in capital cities there are good and bad times of the year to be trying to find tenants. Unfortuantely I don't think there's a lot you can do. If the tenants decide to break the lease, they'll pay some penalties, but the landlord can't stop them and will be out of pocket. Trying to manipulate the lease probably only generates costs and probably not much advantage.

Keep in mind this goes both ways. If you get a tenant during the slow time of the year what's to stop you from putting them on a 6 month lease and either increasing the rent significantly or simply evicting them during the favourable time of the year? If you're buying in an area that has these sorts of extremes, then that should be part of the initial due dilligence (I acknowledge that very few people would go to those lengths in due dilligence).

 

Landlord insurance may solve some of your issues and cover the costs until you find a new tenant if the ex-tenant doesn't abide by their commitment.
Careful tenant selection would go a long way, ie if the person is employed as a teacher in the area then they are likely to stay more than 12mths etc