How to increase your rent and still keep your tenants
Losing tenants, or rather fearing the ability to find new ones, is the most common and most major concern among landlords in Australia. Depending on where your investment property is located, occupancy can be more easily acquired in particular suburbs or towns, as opposed to some others.
Oftentimes, exceptionally well-behaved tenants with a history of consistently paying rent on time can be hard to come by, especially at short notice if your current tenant decides to vacate.
Landlords may want to increase their rent for a number of reasons, however the main one is to match current market value.
Here’s a few tips to consider, ensuring you’ll always keep great tenants and never have an issue finding others while forking out for your own mortgage.
Review how much you’re charging twice a year
Be sure to undertake a thorough analysis of the market a couple of times a year. This will provide you with a rough guide on how much you should be charging, in terms of comparison with other similar properties – you can perhaps even extend this to three times a year for the extra reassurance that your rent is reasonable.
The reason for this is so if you discover you should be charging more, your tenants don’t get slapped with a huge rental increase at the one time. Tenants won’t like that, and if they’re happiness or comfort levels decrease, you’re going to have a bad time as an investor. Increase it in small increments and keep everyone happy.
How to determine the real rental of a property
Let them know well in advance of any increases
It’s never a good idea to give the absolute minimum notice of a rental increase to your loyal tenants, no matter how long you’ve held a relationship together. Unfortunately, tenants will always believe that they are paying too much, usually only by a small amount. Tenants will sometimes compare what they’re paying with similar property types in the same suburb and will almost always ponder a move based on what they find. Failing to provide sufficient notice of an increase can be the ‘icing on the cake’, the final reason they were looking for to vacate or trade-up if you like.
Although there are laws to protect both sides, you should always be considerate, reasonable and courteous with rent increases and notification, for the sake of both your tenants, and your own reputation as a landlord. The minimum notice you can legally give is 60 days, however 90 days is recommended.
Include a Rent-Rise Clause
One of the best ways to ensure the rent is increased regularly with relatively no hassle, is to include a rent-rise clause in the lease. This states that the tenant agrees to the rent being increased by a nominated amount at a specific date throughout the lease period. This is really just a method of setting it in stone or getting it out of the way to avoid addressing it at a later date – you are also guaranteed to get your desired increase, and know exactly when.
Remember that great tenants are far more beneficial than charging higher rent
A crucial thought to consider is how your maintenance expenditure will be affected by your great tenants leaving, and accepting others that may be less than savoury.
If your wonderful, loyal tenants vacate, and your new tenants destroy the place, you’ll be up for more money in repairs than the increase was worth. You want to try and avoid vacancies at all costs.
The bottom line is, you’ll most like maintain a better return and sustain a more profitable investment by doing what it takes to keep the well-behaved tenants.
Promptly respond to requests and repairs
Always stay on top of maintenance request and repairs, or any other concerns that your tenant may have. Your relationship with your tenants are important but never get too personal. There may come a time down the track where business may outweigh that relationship, leading to decisions having to be made that are less than ideal for your tenants. Personal connections can quickly turn to more significant problems in the future when it comes to property investment and making business decisions.