Buying an IP with fixed term tenant

[AlFa]

Hi guys,

I'm looking at buying a house which is rented out on fixed term until August this year way below market values. Looking at worst case (tenant is not willing to move even with some financial compensation) would you still buy it and bear the losses for 7 months?
It seems rent could be put up $70-80 after fixed term expired

[Nick G]

$70 * 30 weeks is $2100. I'd say yes that's not a lot to worry about. Just factor in that $2K to how you value the property.

[artemis]

Might not end up being 7 months. You have to give notice between 21 and 90 days before the expiry date, otherwise you have a periodic tenancy and it's another 90 days notice. If you give notice of termination and rent increase at the same time - that is at 90 days plus delivery time - and advise the tenants that they can leave before the termination date if they wish they may well leave earlier. Generally in that situation, tenants will start looking pretty much immediately.

[Keys]

Does the current tenancy agreement have a rent increase clause in it?

[AlFa]

I don't know for sure but doubt it

[Nick G]

I like the advice to say that you'll be putting up rent on day X so they may find something else and move on

[Wayne]

Might not end up being 7 months. You have to give notice between 21 and 90 days before the expiry date, otherwise you have a periodic tenancy and it's another 90 days notice. If you give notice of termination and rent increase at the same time - that is at 90 days plus delivery time - and advise the tenants that they can leave before the termination date if they wish they may well leave earlier. Generally in that situation, tenants will start looking pretty much immediately.

7 months or 10 months - still not a lot over the price of a house I'd say.
Just work the numbers on worst case.