You are in the rental property game to make money. So how do you successfully raise the rent WITHOUT losing your tenants?
First things first, in Australia make sure that you have a clause in your tenancy lease agreement that stipulates the increase or the method of calculating the increase! Without this there is no legal way to go about it.
A lot landlords think the only way to raise rent is to wait for tenants to move out – but this is not the case. If you handle it carefully and sensibly, you won’t necessarily lose your tenants and you will be increasing profits. It can be a daunting task for some landlords as they don’t want any confrontation, don’t want to rock the boat, don’t want to deal with tenants moving out or maybe they are too friendly with their tenants! However, if you want to increase your profits, it has to be done. There is a right way of going about it.
- It’s important first to look at your operating costs for you property to see if they far exceed the income. Like everything else they will increase over time. This is valuable information to have if the tenant asks for reasons why rent is increasing.
- Make sure you research comparable properties in the area to ensure that you are not pricing yourself out of the market.
Keep it Small
Don’t be tempted to put up the rent in big chunks, this will rush people out the door. Try and aim to keep it under 10%. If it needs to go up more, it’s better to do little and often, rather than in one shot. Also keep in mind this must be don’t legally, it has to be in the tenancy lease agreement.
Give Tenants Plenty of Notice
If possible when tenants move in, verbally warn them that rental increases can and are likely to occur over time. You should already have this in writing in your tenancy agreement with the tenants, so this should not be a surprise. To be sporting – when you are about to increase the rent – try and give tenants as much notice as possible. Legally you have to give 60 days notice, but depending on your relationship with your tenants, providing a bit more may be the courteous thing to do. It also allows you to find new tenants if indeed your old ones move out.
If you follow all these steps, it’s likely that you will get the best of both worlds – increased rents and long term clients.
Do you have any tips on increase the rents on your properties?