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  1. #1

    Default How much to increase the rent by?

    Hi all, I'm hoping someone a bit more experienced than me can help please. I own a 3bdrm average quality villa in central Auckland managed by a property manager. It has been rented for $500 a week to four tenants who moved in Sept 10. (Just before it was rented, another property manager of a different company happened to go through and said she would have been able to rent it for $540-570, but the deal was already done at $500). Now that 6 months have passed I can increase the rent. My current property manager said if he was renting to new tenants tomorrow, he would set the price at $540, but suggested to me as they are good tenants that I should only increase the price by $10 to $510 per week, or max $520 as good tenants are worth receiving lower rents. I don't want to be unfair to the tenants either as they only moved in 6 months ago. I would appreciate opinions from anyone as to what an appropriate increase might be. Thanks for your help!!

  2. #2
    Join Date
    Apr 2004
    Location
    Auckland
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    1,896

    Default

    What's the worst that happens?
    They move out - then have to relet in winter.
    It still takes 60 days for rent increase to happen.

    If $540 is reasonable - have a quick look on trademe to compare - then put it up!
    PMs can be a bit slow on this - so give them a kick.
    The three most harmful addictions are heroin, carbohydrates and a monthly salary - Fred Wilson.

  3. #3
    Join Date
    May 2007
    Location
    Hamilton
    Posts
    3,581

    Default

    Just think about the cost if the tenants do move out.

    Say extra $20 per week, is $1,040 per year.

    If your tenants move out, and you can't get new ones for 2 weeks, that losses you $1040

    So I would think carefully about how long would it take you to get new tenants if the current ones move out? As you are in auckland, I"m guessing there may be no loss due to high tenant demand. Therefore there may be no, or little downside.

    Ross
    More Profit from Property? TEACH ME MORE
    Ross Barnett - Coombe Smith Property Accountants
    Proud to give the best property advice for over 13 years.

  4. #4
    Join Date
    Jan 2010
    Location
    Hibiscus Coast
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    Do you personally think that they will be getting value for money if they have to pay $540 - $570 week? Apart from it being in Mt Eden and close to the city has it been insulated and does it have some form of heating? Does it have modern fixtures and fittings? Why would people be prepared to pay that extra $40 - $70 week to live there?
    Why does the current pm think that they are good tenants? What happens if the rent goes up and the boyfriends/girlfriends move in and wear and tear is rampant?
    The object I reckon is to have a property that is desirable and then you get to pick and choose your tenants.

  5. #5
    Join Date
    Nov 2008
    Location
    Karratha WA
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    1,444

    Default

    I am happy to put rents up by up to $25 without worrying. It's only 5%.

    Or, since there are 4 tenants, put it up $20 (so they can work it out) now, and see how it goes, then increase by $20 each 6 months until it reaches market.

    It is impossible to keep rents at market if you are scared to put it up. If your tenant stays forever because of under market rent you'll never get it! Then you'll wish you had put it up years ago. Be brave.

  6. #6
    Join Date
    May 2007
    Location
    Hamilton
    Posts
    3,581

    Default What some property managers do

    I've noticed that some property managers send rental review letters every 6 months.
    - So first one might say "We have reveiwed your rent, and decided that it will stay the same for the next 6 months"

    Then every 6 months the tenant starts to expect a review. If they get a couple with no change, then they probably expect the next to be an increase.

    Ross
    More Profit from Property? TEACH ME MORE
    Ross Barnett - Coombe Smith Property Accountants
    Proud to give the best property advice for over 13 years.

  7. #7
    Join Date
    Jan 2010
    Location
    Hibiscus Coast
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    1,790

    Default

    If a tenant signs or renews their lease for another 6 months then after 5 months they are contacted to renew again. At that time I make a decision based on what the market is doing, demand and their own circumstances as to whether or not to increase the rent.
    Having said that one of my own tenants has been paying the same rent for 3 years now and I really must get around to putting it up!!
    Property is in Whangarei and the rents have not moved until now.

  8. #8
    Join Date
    Apr 2005
    Posts
    787

    Default

    Rosco wrote:
    Just think about the cost if the tenants do move out.

    Say extra $20 per week, is $1,040 per year.

    If your tenants move out, and you can't get new ones for 2 weeks, that loses you $1040
    So I would think carefully about how long would it take you to get new tenants if the current ones move out? As you are in auckland, I"m guessing there may be no loss due to high tenant demand. Therefore there may be no, or little downside.
    When your tenant gives notice start marketing (trademe, sign) the property immediately, take advantage of that three week period while they are still paying rent. I generally let a property in the three week notice period ie no loss of rent.

  9. #9
    Join Date
    Nov 2006
    Location
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    Quote Originally Posted by Meehole View Post
    If a tenant signs or renews their lease for another 6 months then after 5 months they are contacted to renew again. At that time I make a decision based on what the market is doing, demand and their own circumstances as to whether or not to increase the rent.
    Having said that one of my own tenants has been paying the same rent for 3 years now and I really must get around to putting it up!!
    Property is in Whangarei and the rents have not moved until now.
    At that time, it's too late to increase the rent.

  10. #10
    Join Date
    Jan 2010
    Location
    Hibiscus Coast
    Posts
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    Default

    Quote Originally Posted by Keys View Post
    At that time, it's too late to increase the rent.
    Too late for what? Didn't realise it was a race.
    Some of the tenants whose 6 month fixed term is coming to an end, may have leased the property when there wasn't such a demand and a lower rental was negotiated. Now that there is more of a demand when they are offered a renewal they are advised at the same time of an increase (or not).
    At the end of the day as a PM I have to do my best for the LL and well as looking after a good tenant. Without either my income reduces.


 

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