I bought an off the plan investment apartment about 1.5 years ago.
I had to get a tenant in quickly and advertised it in the low $400s/week to quickly get a tenant in.
We signed a 12 month contract which expired in Jan 2020 of this year.
Just now I looked at rental adverts from the same building for same size apartments and they range in $500-$525.
Should I increase the rent given the current economic climate?
Or is that a dick move?
Should I Increase The Rent?
Lmqi on 06/04/2020 - 16:27
Comments
bravo on your logic….
Lol. 400 in the hand if it pays for it is better then a new tennant…
If your current tenant looked after the place well and want to continue staying, I would not increase the rent.
I wish this was told to my previous landlord…
A good steady tenant who pays on time and doesn’t damage things or create trouble is worth keeping over any small rent increase. Besides the adverts you’re comparing to are just list prices or what the landlord is hoping for… not what they will necessarily be able to secure.
If your tenant is reliable, I would recommend trading off higher rent for a renewed 12 month lease period. I think most landlords would gladly take 12 months of guaranteed rental income right now.
landlords would gladly take 12 months of guaranteed rental income right now.
Nothing is guaranteed during the 6 months rent moratorium.
Nothing is guaranteed during the 6 months rent moratorium.
Its not 6 months FREE rent, its 6 months of can't kick them out. The rent is still owed.
True, but how many are going to use this to their advantage? Quite a few I'd say.
But if they don't pay, what can you do?
@fredblogs: Depends on their reason for not paying. Judging from the above replies the hypothetical was people exploiting the freeze into not paying then bailing after, which you can still go after them afterwards.
If it's someone with no income, courts can still go after their assets/estate etc.
I'm just providing the hypothetical answer, you're acting all funny about it.@Hangryuman: You would seek a wage garnishment from their incomes, whether that is from an employer, or directly from their Centrelink payment.
Nothing is guaranteed during the 6 months rent moratorium.
Guaranteed to not get evicted.
My tenants are great and in pandemic-resilient professions. There is zero chance I will increase rent. I'll jump at the chance to extend their contract another 12 months.
There is zero chance I will increase rent.
Our tenant wanted a 2 year lease extension and offered to pay a little extra to seal the deal. Even then we were quite reluctant to agree to it. 2 years feel like an eternity and we liked having the option of selling if we needed to.
@Kivharo: We do but having open houses will be disruptive to the tenants and we would rather avoid that.
Havn't interest rates on loans been dropped to nearly nothing? with a possibly mortgage freeze, the possibility of something during the interim sounds pretty nice actually
During the current economic climate?
That's a great way to remove your current tenant and struggle to find another.Review in 6-12 months time, that way you'll come across in a more favourable light.
Or is that a dick move?
You've said it yourself!
Consider telling them you had planned to raise the rent, but you are conscious that everyone is feeling lots of uncertainty, so you are leaving it at $400.
They will think you are a decent human and be a bit less likely to take the below market rent for granted.
My REA sent me an email asking to sign another 12 months ages ago (over a year), I asked if anything would change and she just said it would prevent any rent rises. I didn't reply and nothing has changed.
errr, or don't. If it is truly below market, they'll be aware of it already.
I believe some people here would call it "lording over" your tenant.There is no need to - you either increase the rent or you don't.
Ps: Advertise rate does not necessarily equal market rate. I wonder how long it will be before Op's neighbors find tenant… and at what rate.
What’s with the stupid mind games. Should the serf tenants bow as you pass? Wtaf?
It's a dick move to charge fair market rate on your rent? Consider this a world of dicks I guess. Unfortunately most home owners can't afford to be a charity and need to recoup the costs and interests on their mortgage. If the tenant doesn't like that they can leave. It's upto OP if he considers that worthwhile but it's definitely not a dick move.
I find this a hard thing to say, but I agree with you.
The market will decide based on the current economic circumstances. As with all investments, the OP has to make a decision if the risk is worth the move.
Should I increase the rent given the current economic climate?
You run the risk of increasing it and them no longer being able to pay.
Are they still paying rent? If so, just 'ride it out' until this is over and then increase it. You have been happy with $400/wk for the last 12 months, just hang in there for another 6-12 months and then up it.
Or is that a dick move?
Kinda yeah, you should have done this back in Jan not now.
Well that's one way to get around the moratorium on evictions. :)
Leave the rent as is, you will seem extremely greedy at the moment and may make the tenant angry and they may decide to stop paying altogether due to the eviction ban.
Keep it on periodic agreement for now until the new laws are clear in your state ie don't sign new 12 month lease.
It is not clear whether evictions might still be allowed for reasons other than non payment of rent so leaving it on periodic might give the option of evicting them for some other reason if they stop paying rent (although I am pretty sure they will stop that too but we will see).
End of the day its an investment, not a charity. Based on the current situation you can't evict a tenant if they can't pay, however should have been given info on how much they earn. So you could probably work out if they could afford the hike yourself.
For mine I always keep it slightly under market but 20% under is excessive you should be getting min $470-480 if your apartment is equivalent to what you quoted.
As a fellow landlord, this is a massive dick move and it's your fault for not being more patient to get a higher rental income from it if that was appropriate for the area.
Wait 12 months and reconsider.
Contract expired in January? So there's no new contract?
Depends on what the contract said.
Raise it to $600 while offering a 12-month supply of toilet paper. Let us know how it goes.
Raise it to $600 and remove all the light globes
Okay, putting aside whether what you're doing is a dick move or not, it's just not a very wise investment decision.
What you're looking at in terms of the properties around you are advertised rents, not the final rent being paid after negotiations. I would be willing to bet that if a tenant were to try to sign a lease right now, they would be able to negotiate a rent far below what is being advertised. My friends who have investment properties are currently in all sorts of trouble trying to keep their tenants.
You should be happy that you have good tenants who are still paying you. Increasing their rent may well result in them moving out. If you're deadset on increasing rents, I would suggest actually trying to figure out how much people are actually paying in those properties around you rather than just relying on the advertised rents.
So it has taken 3 months since the leas expired for you to review the rent for the property, and realise you are charging some 25% below the market rate?
If this is the sort of oversight you maintain over all your "investments" you will soon go broke.Save the adverts that you saw of the other apartments, send it to your tenant to explain why it's increasing. The other owners were not thinking about whether it's a dick move when they increased their rent. I'd do it a little at a time, not straight up to $500 in one go.
And an advert doesn't actually mean that'll be the final price. They could be trying their luck. A few weeks later, they may lower the rent to get a tenant.
It all depends if you believe in karma or not.
Brilliant First Post
Another thing to consider is if you can even raise it that much legally. I would imagine not.
This ^^.
Exactly. Tenants can object to unreasonable rent increases. I'd do that if you raised my rent in this climate.
https://www.consumer.vic.gov.au/housing/renting/during-a-lea…
I'm not sure (but have always been curious) how VCAT works with property agents but I imagine they handle it for you then charge like a wounded bull.
So you could lose part or all of your rent increase and then even more in property agent fees.
Why is it a dick move?
You are the LL you set whatever price you see fit.
Whether the market will meet your price is another matter.
You don't owe any tenant or potential tenant anything.
Guess you've been living under a rock and have no idea what's going on???
I'm going to give this one a hard no.
If you reaaally want to - i'd run the gauntlet and say you'll give them a $10 a week increase if they wish to stay on month to month, or they can sign a 12 month lease with no increase. 12 months of semi security right now is worth a hell of a lot more than a couple of hundred dollars over the course of the year.
If they are still paying rent, and haven't asked for a reduction, than don't raise it. Don't stir the pot.
Best if you keep them happy, or they may move elsewhere( or trash the place), which is a pain for both parties.
Afterall, how long will you be without money coming in, after they move out?
1 week, 1 month, 3 months or more?, Especially given the current climate.
I was a tenant of a business that went 8 years without an increase, Building was sold, new landlord wanted to up the rent, and did. 2 years later we had to close, but our business had been declining, and an 'employee' had been taking money. The shop was vacant for 18 months despite being on a main highway, with heaps of exposure.
I had to do a rent reduction a few months back to get a new tenant in.
When the lease expires later this year, I'll probably keep it same rate as an increase won't mean shit in this environment if I can't get a new tenant within at least 2 months.
Person asks if they're being an evil turd, is horrified to find that the answer is yes.
Being part of the rentier investment class involves risk. You could lose it all. Capitalism, baby.
That depends on how much you value your current tenants. At the moment you have Buckley's chance of getting new tenants so some rent is better than no rent.
Yes
Lets put it this way, if you do increase the rent and lose your tenants, can I have them for my rental property?
You have a tenant and in the current climate, consider yourself lucky!
OP, even if you did ask for an increase, they would most likely use this current situation as a bargaining tool & maybe you'd wake up & realise, it was a dumb thing to try and do the way things are at the moment.
Consider yourself lucky they are there & paying full rent.
I actually reduced my tenants rent to over this period of uncertainty to show good intentions and hope they will stay and remain my good tenants.
I did a similar thing last year but for a different purpose as there are works at my complex affecting my tenants. Other owners didn't do this and continued charging their tenants at max rent… and they wonder why their tenants all broke lease when the works started kicking off. Owners were informed by the body corp well in advance that these works were coming up and that certain areas of each lot should not be accessed.
Thanks folks for your input.
Have decided to play it safe and leave the rent as is.
My key mistake was not looking at rental prices in Dec last year and then informing him of the rent rise and locking it in for Jan/Feb this year.TBH, if you had increased the rent in Jan/Feb 2020, your tenant would probably be asking to be exempt from rent right about now or at least a rental reduction. I would consider yourself lucky that your tenant is leasing at below market value which doesn't give them as much room to negotiate and if other properties in your building are $100/wk more, they'd know that they're getting a good deal and probably want this going forward.
If the rental income does not cover your mortgage repayments, consider talking to your bank to seek a repayment value reduction due to hardship (considering it was always your plan to bump up the rent which is now not desirable to do).
Are you an ID*! have you not been watching the news, keep up with current events.
Do you understand what is happening around you?If anything the rent should reduced
There is one thing that will determine your rent, supply and demand. If your property is in a much sorted area, someone will be willing to pay for it.
Whilst it’s all academic now, you could have gone 1/2 way and tried bumping it to say $430-$450, that way you’re not seen to be greedy.At the end of the day, your investment property is a business, it’s not a charity, you don’t owe or need to do anyone any favours.
Definitely would be (in your own words) a dick move. If you have a tenant who is paying the rent, then you are in a good position at this point in time.
Yes, absolutely yes.
Its not really a dick move
Most people here don't own their own house or even have 5k in the bank. They think renting means they own the place and they have owners' rights and use this pandemic for a bunch of excuses. The government is handing them free money and they still complain.
I would speak to your tenant first and ask him how he feels about it. You could go maybe $450 and advise him you're trying to pay your mortgage off faster and I am sure body corporate isn't any cheaper as they usually increase that as well.
Go $450 for the next 6 months and then increase to $500 after that. At least that way you're not really losing out.
There is plenty of people still with jobs and would still be looking for rentals.
I don't think people here realize there are costs involved in owning an investment property, maintenance, rates, body corporate etc
Its easy to say REDUCE THE RENT, DONT INCREASE IT but you haven't the slightest care about the owner.
You seem to be missing one very important consideration, It's a renters market at the moment and likely to be so for another year or so, the market doesn't care about the owners' costs, what it costs the owner to keep has little impact on what the market is prepared to pay.
Spoken like a true renter who doesn't own any assets
And doesn’t need to. People play to the prevailing conditions, be they investors or consumers.
As a consumer, I will only pay the fair value I believe the product is worth in the market conditions. A producers costs are not a consideration.
Basically, your product is only worth what someone is willing to pay for it.
Spoken like a true renter who doesn't own any assets
Nope, spoken like someone who didn't over extend themselves on a speculative investment.
@tryagain: As someone who's got Masters level property qualifications and their own investment properties, I have to agree that most property owners don't realise how costly property ownership is and don't keep enough access to equity for major repairs and other unforeseeable situations, relying too much on cashflow.
Also, there's a third variable in the equation… the bank. Owners are in a very good position to negotiate with the banks for a freeze on repayments due to hardship or other better arrangements if their rental income has been impacted.
Raising the rent to 500 from 400 is a 25% increase i would prob deem that to be a bit unreasonable if you raise it by a 5% margin annually might be more fair?
Your tenant could find somewhere cheaper to live, if you want to charge market rent.
Your agent will have the best idea as to what you should charge given the current climate. The advertised rate might not reflect what properties are actually renting for right now.
It is possible you could raise the rent and still be charging below the current market rate. This would be fair for all and I don’t think any reasonable tenant would object if their situation is secure.
Fact is there is always the possibility of tenants moving out if you raise the rent (or whenever a fixed term lease expires). You just gotta work out what is reasonable and the risk you’re willing to take under the circumstance (Coronavirus or not).
In the end your tenant has 3 choices:
1. Accept new rent
2. Move out
3. Complain to the authority and have a binding rent assessment madeThe whole “stop paying rent for 6 months” is a bit extreme. Technically your tenants could trash your place and set it alight too. But both have consequences for the tenant.
Unfortunately anyone can become an agent. They are not qualified economists, nor are they epidemiologists / experts in pandemics.
Agree. There are agents and then there are good agents… the latter understands the rights of both landlords and tenants, knows what's fair, and understand that old property statement: "cashflow is king", is usually what makes or breaks a landlord.
I've seen too many owners sign up with the cheapest property manager around… they get sub par tenants, unreliable inspections, poor advice (mine actually consults a lawyer on unique matters… having worked with property managers, very few do this) and thus end up in bad situations because their property manager wasn't strategic and acting in the landlord's longterm best interests.
Lol OP how many of these identcal apartments were sitting vacant?
Raise it once the moratorium is over.
Raise it now and risk not getting anything.
Yeah it is a bit of a dick move to list your place 'cheap' to get a tenant in, but then smash it up high the first chance you get.
Maybe go for a 10% increase and see how the tenant responds, you can point out that this is still far below the market rate.
increase rent on the new lease yes, but not by a huge amount increase it every 6 or 12 months slowly till you reach the reasonable rent be sure to explain to the tenant why you are doing this with evidence as to why they are still better off for now. People are right thought a good tenant is a value of its own and worth slightly under charging to keep.
an agreement like "so long as you take care of this property I can say you'll always have 10% less then the medium rent for this area"
From a tenant's perspective:
I live in a 10 year old apartment building in Fortitude Valley where most of my neighbours pay $475-$550 per week for a 2 BHK/1 Bath
There are plenty of newer (albeit slightly smaller) apartments which are now empty for $450 per week. Larger newer ones are about $500-$550 per week.
I am paying $400 per week. It was advertised as $440 per week 3 years ago when I rented this place and we negotiated it down to $400 because this place was empty for a few months.
We are happy with the place and the landlord is happy with us as tenants and hasn't increased the rent because we are happy to renew the lease every year and has not increased the rent so far.
Our thought process is, we don't need a newer place as this is very comfortable for us and no issues with the neighbours or the landlord. But if the rent is increased, we might as well move to a newer place for that kind of money. Especially in this market, there are so many apartments vacant.
I have thought about asking him for a reduced rent because my wife lost my job, but I have refused to do so because they have been good to us and don't want to ask for a rent reduction as it is not their responsibility.
Dump a reliable tenant and struggle to even find someone to move in while the moratorium is in effect. I don't know if it's a dick move, but it isn't a bright one.
Depends how much it costs to get a new tenant in (if you even will in this climate of oversupply).