Why the aversion to paying market rent?

[Perry]

Somewhere in amongst all this, is there not room for 'market forces?'

Why pay 50% more for a loaf of bread at the petrol station, than the supermarket?

Perhaps because it's convenient?

Convenience comes at a price.

[PC]

It isn't greedy landlords putting up rents. It's the greedy government. Remove all the rent subsidies and guess what happens? The cost gets passed on. Remove negative gearing - and guess what? Rents going up big time again.

[Perry]

Not to mention the expense of installing things most of which will never get used.

See Peter's comments, here.

[flyernzl]

Also keep in mind its cheaper to buy in some instances. $500 mortgage will get you a propety near the beach. You will lose the 10 min commute and it will become 35-45 minutes, but at least you dont have the anal land lord down your neck every 6 months and you are spending $180 less minus $40 transport per week.

Sounds fine, until the bills for rates, insurance and maintenance turn up. At that point many realise that there is more to the cost of home ownership than just the mortgage.
I have actually met people who have no idea that you need to insure a house, and of course no idea how expensive rates can be.
Add $100 - or more - each and every week onto the mortgage costs to find the real cost of property ownership.

Plenty of tenants are landlords and will object to somebody being overly anal/greedy.

Plenty of landlords are actually paying more in the cost of ownership than they are getting in rent.
Add in the loss of interest on the equity that they might get elsewhere, the interest on the mortgage, the overheads (rates, insurance, etc), the cost of maintenance and a renovation every five or ten years, and a margin for time and risk. Very few landlords are getting a reasonable return for all of that.

And dont drag up the chimera of capital gain - do you expect a supermarket to sell groceries cheaper because the value of their building has gone up?

[Don't believe the Hype]

OP I dont get this feeling, but I do think long term tenants are worth holding on to, if you price them out of the area they will just up and leave,

I think its simply a case of not pricing people out and if you have 5 years of full occupancy vs constant 4 month vacancy I think it makes sense to be the smarter landlord not the greedy one

You're right a good tenant has great value. I currently have a large number of great tenants in my properties. The challenge is that whilst they're great tenants some are paying well below market rent.

In all reality some of these tenants can't afford the market rent for their property so by keeping rent below market are we helping or just delaying the inevitable?

- In the event that I sell the property the incoming owner is almost certainly going to raise the rent to market levels

- As rates and insurance rise i'm going to need to recover these costs OR my investment return goes backwards (or my losses increase)

As a tenant, if you can't afford market rent in a location you need to consider your long term plan for living in that location. You can't rely on the charity of the landlord to support your lifestyle

[flyernzl]

I have just powered up the calculator.
Most of my rents are at or near market levels.
I am earning a return of 1.67% on my rental properties.
Is that a great return for my time, risk, efforts, and investment?
One thing is for sure, I am not 'greedy'!

[Keys]

I am earning a return of 1.67% on my rental properties.

Something to put into your next blog posting.

[Beano]

I have just powered up the calculator.
Most of my rents are at or near market levels.
I am earning a return of 1.67% on my rental properties.
Is that a great return for my time, risk, efforts, and investment?
One thing is for sure, I am not 'greedy'!

1.67 % per month is ok :-)

[Don't believe the Hype]

I have just powered up the calculator.
Most of my rents are at or near market levels.
I am earning a return of 1.67% on my rental properties.
Is that a great return for my time, risk, efforts, and investment?
One thing is for sure, I am not 'greedy'!

1.67% - better than bank interest. You're one of the lucky ones

[Davo36]

I have just powered up the calculator.
Most of my rents are at or near market levels.
I am earning a return of 1.67% on my rental properties.
Is that a great return for my time, risk, efforts, and investment?
One thing is for sure, I am not 'greedy'!

Surely either your rents are low or your property values are really high.

I have properties in South Auckland. My gross return is 4.88%. Approx 3.8% net. Still low.

Maybe I'm using the wrong property values...

[flyernzl]

The problem is that the rate of increase in the values of the property has not been matched by similar increases in market rents.

Eg One 3brm property cost $125K, many years later now worth $1.1mil. Starter rent was $220p/wk, rent now $540p/wk.
To reflect a similar percentage increase the rent theoretically should now be $1936p/wk

(And dont blab on about capital gain, my supermarket wont accept a bit of capital gain from me when I buy the groceries).

[Perry]

ROI+ vs ROV+

Maybe I'm using the wrong property values...

Or the wrong calculator.

But what would the figure look like if one added together the purchase price, servicing costs, rates, R&M, insurance, personal effort expense and so on, ignoring the piece-of-paper-says revised figure?

[OnTheMove]

Sounds fine, until the bills for rates, insurance and maintenance turn up. At that point many realise that there is more to the cost of home ownership than just the mortgage.

Wasnt aimed at your Flyer, you sound like a fair landlord. And you are making a MASSIVE ROI, but if its under others rentals in nearby streets, perhaps you could catch up slowly with yearly raises and stop short of others to keep these good tenants it sounds like you have. They will know they are onto far too good a thing and will pay closer to the local rent prices.

The reality is, unless you bought your property 20+ year ago, the market is screwed for the next 20 years. Unless somebody does something about either property prices or incomes. Given our politicians live election to election I see none doing anything about it.

Being a landlord was good when we had a steady 8% PA, and great in the last 20 years, but its done for if you want to get into it now. There is nothing left.

We have a whole generation who grew up thinking property prices only go up, and at ridiculous rates along with rents.

All I was saying is somebody who looks after your rental like its their own for 5 years is worth the savings in property wear and tear alone.

IMO reviewing rentals every 6 months like its monopoly is ridiculous and I suspect the person has borrowed a lot of money and wants to raise rents to get out of debt instead of paying it of themselves along with renter (over mortgaged). Its not worth the continuous loss in occupancy because you pissed the tenant off every year and higher RE agent fees.

Treat tenants like customers, treat them well (just marginally better for their long repeat business)and they will treat you well and look after your asset.

Plus its a wank move to be a prick landlord, Im sure we have all experienced one in our own lives. There is always room to make some money and be a normal compassionate human being.

[Keys]

There is always room to make some money and be a normal compassionate human being.

12 year historical conviction for pedophilia. What do I do with that applicant?

[PC]

What % of rent goes to cover the taxes?
Is it 56% like the cost of building?