Hi All
Just wondering if a 15% increase in rent is fair given that there hasn’t been an increase for 18 months, and the new rent will still be under market.
This particular tenant will complain regardless of how much I increase the rent so I just want some objective feedback first.
Thanks
Hi oshen,
I am in a similar situation myself. Tenants are paying $130 which is below market rents in the area. They have agreed to pay $140, which is also below market rents. I don’t want to push any higher than this at this stage as I don’t want to risk having the home sit vacant.
Speak to your property manager and see what they say. Normally if you give the tenant something in return, they won’t mind a slight rent increase.
Regards,
OziThanks Ozi
I don’t actually mind if she moves out. I’m just concerned about not asking something unreasonable of a person. I manage the duplex myself and rented out the other side recently for $125 (which is standard in the area for a duplex) I had so many phone calls about it, someone even offered to pay $150 with a $900 deposit, and a fake reference thrown in for free!This other one is rented to a pensioner at $100 per week. Hence I’m not too concerned if she moves out rather than pay $115.
I just want to know if a 15% rise is considered reasonable by reasonable people.
Thanks
Do a search for the tenants union, or similar, in your state. These sites have a wealth of information (from the tenants point of view) on what landlords can and can’t do. I think there may be limits on what you can raise the rents by in one hit.
Another option would be raise it $25 now and another $25 in 6 months.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
How would you feel if your landlord was to hit you with a 15% increase.
Perhaps the tennant has been getting cheap rent.
Terry’s suggestion appears fair 7.5% now and 7.5% in 6 months or something similar.
If they are a low maintenance tennent (i.e. minimal maintenance costs) then I would make the increase as low as possible.
These are my thoughts.hope it helps.
hrm
Originally posted by hmackay:How would you feel if your landlord was to hit you with a 15% increase.
I would feel OK with that, but I’m only one person, hence putting it to the forum
Perhaps the tennant has been getting cheap rent.
She has. She will still be getting cheap rent after the increase. Please see initial post.
Terry’s suggestion appears fair 7.5% now and 7.5% in 6 months or something similar.
Do you really think so, for such a small amount? Two lots of stress and complaints.
If they are a low maintenance tennent (i.e. minimal maintenance costs) then I would make the increase as low as possible.
She is and how much is as low as possible? I am losing money now so she can have cheap rent. As I said previously, if she moves out, I will be in a better position finacncially, but that’s not what I’m about.
These are my thoughts.hope it helps.
Hope springs eternal. OK, now I’m being a smart arse [wink]
hrmLet’s make it a yes or no question.
Is a 15% rent increase fair if there has been no increase for 18 months and the increased amount will still be under market rent?
In my opinion, you have answered the question yourself. If it is under market value, you have not increased in in 18 months, I’d be asking for the 15%, especially if you are not too concerned if she moves out.
I’d go for it. Better the money in your pocket, especially as she has been getting cheap rent for quite some time. If you manage your own property, I’d make sure you put in your letter that market rent is $….. and she has been paying considerably under market rent for 18 months, so that she knows the reason for the increase. It would also put you in a better light if she decided to oppose the increase through the RTA (or similar in your state).
Good luck, hope it works.
Wylie
Hi,
As a pensioner, there’s a fair chance she is receiving a reasonable amount of rental assistance, so won’t have to pay the full rise out of her own pocket. Check with Centrelink what sort of rent assistance she might be getting.
Sounds like you would have no worries getting another tenant if she does move and your current tenant will have to pay whatever market rent is going anyway.
On the flip side, our experience as tenants of what we considered as an “unreasonable” rent rise (20%) showed that in NSW there is no tribunal ceiling on how much rent can be increased in one hit. However, our landlord lost all our goodwill because we were being asked to pay this increase when absolutely no maintenance (and the maintenance required was pretty major) had been done for a long time. So perhaps you can improve the place a bit which will help ease the pain for her and keep a reasonable relationship between both of you? BTW, negotiation meant we only paid half the rent rise and got some maintenance done.
All the best,
JennyThanks Jenny, Wylie, and everyone. That’s good advice. I will increase her rent to $115 and write in the letter that I am happy for her to continue paying $10 less than the market rent as she is a long term tenant and looks after the place very well.
Her unit is actually in better condition than the more expensive one which has had a series of bachelors in it.
Hi,
The easiest way to find out if it is fair is to raise the rent to whatever you want and see how hard the tenent complains. If you are worried $15 / week is too much; write a letter saying you are raising rent by $25/week. If no complaints then congratulations you picked the right number. If there is a complaint then drop the increase to only $15/week and you are a hero for being reasonable. You can’t lose. It’s a free market and the tenent can move to cheaper accomodation if they want.Surrey.
oshen,
We purchased 4 strata units rented at 1*110,2*95,1*90 the three lower ones being to pensioners and as soon as they settled we raised the rent 110 per week on all.However we did not wite to them ,we actually visited and told them face to face . Played all apologetic and let them see that we were sorry to do this but had to be done . $110 was reasonable rent for the units. They are still there (6 mths later a new tenant in one is now on 120(not pensioner) so they can see good deal) And as has been said they put in adjustments to Centrelink to maybe receive more.
Also we collect rents thru Centrelink and tenants do not have to worry about going to the bank and we have rent regurlarly fornightly for $1.01 commission per pay. I belive they appreciated being told face top face . Cheers for now LenHi oshen,
Go ahead put the rent up,if there’s any probs then
get a new tenant, no problem’s.
Regardshttp://www.owner.com.au
http://www.owner.com.au/phototour/listing_phototour.cfm?listingid=22315When I was flatting they never put the rent up.
I was paying $95 a week for a 1 bedroom in Leederville for a year and then $120 a week for a 2 bedroom in Glendalough for about 16 months.
The lady that lived in the flat in Leederville before me had been there for 10 years and was paying $70pw rent.
I assume they put the rent up again after I left and a new person moved in.
I would suggest sending them a letter saying the rent will increase when it is time to renew the lease.
I find some of the answer amusing.
Since when is the word “fair” factored into the price of something? Is the price of a pizza fair? What about the price of petrol? Is that fair? An Armani suit? now that is clearly not fair!!
Renting a property is supposed to be a business, the price of such comodity is regulated by offer and demand.
If you rent under the market value and do not lift the price, you are doing bad business for you and others. If you are renting under the value yet cannot lift the price whitout losing the tenant you are either NOT under the market value or you have a tenant you need to lose fast.How much can you lift your rent? As much as you legaly are allowed to, and fast!
Your limit is how much the average tenant is prepared to pay. To bring in sentimental fairness and personal assessment of the tenant situation is realy bad for buinsess. What are property managers there for?
The best you can do is not knowing anything at all about your tenants. Leave it up to your PM.“What you want in your life occasionally shows up…
what you must have… always does.” . . . . . Doug Firebaugh
May God Prosper you.[biggrin]
MarcIf you feel 15% is fair rent increase all things considered. I would do it in one hit. I wouldn’t sugar coat it with anything.
I’m pretty sure rent assistance would be half. Any complaining would probably be due to the person in question simply being of that temperment.
Just do it.
As a tenant in the past, I would probably be indignant at any rent increase but would probably not do anything about it except complain.
Good on you for sharing your decisions.
Live, Learn and GrowLifexperience
Hi 1winner
Interesting take on the situation. To answer your question, fairness comes into every decision I make whether it be a buisiness or a personal decision. It’s simply a question of my own ethics and morality. Fairness, to me is very objective and has nothing to do with how much the person on the other end of my decision complains. Is the price of a pizza or an armani suit fair? I don’t know. I don’t know anything about the costs etc. People engage in business to make money to provide for themselves and their family. They are entitled to make a profit and will charge accordingly. But if greed takes over and their intention is to make money at all costs, even to the detriment of another, then that’s probably not a good thing.Taking sweat shops as an example, people in 3rd world countries are working long hours and being paid a pittance and yet the cost of the product is exorbitant. That is unfair. Is it fair to pay $250 for a pair of runners? Maybe, but the distribution of that money is obviously not.
Is the price of petrol fair? Probably, if the price is driven by the price of oil and the need of the owners of the servo to make a living. If it’s driven by greed then probably not.
I’m in the process of moving house and the owner initially told me it would be a 2 year agreement at least. On that basis I bought certain things for the house and even helped get it finished, by arranging for the electrical work and phone line etc to be done. The owner is in Sydney and was having trouble getting the finishing off work organized. He recently said that he now wants to give me a 6 month lease initially and will probably renew it after that. At the time, that seemed blatantly unfair to me, and on reflection, I have realised that it is. Even if he renews the lease, there is no security for me, and if he doesn’t renew it, then I will have lost a lot of money and be very inconvenienced.
Now, this behaviour towards me doesn’t make me want to be unfair to others. In fact it just makes me more considerate and empathetic.
Not all things are fair, especially in business, but that is no excuse for any one of us to behave in the same way.
Having rented for most of my life, I also hope I never have to inflict a PM on one of my tenants. Apologies to any genuinely good PM’s reading this, but you have to admit that you are in the minority.
Owning investment properties may be a business for me, but it is not a business for the tenants. It is their home while they live there and that has to be respected.
So, 1Winner, regardless of the price of pizza, I desire to be honest and fair in all my dealings in business and in my personal life. I am glad you have found amusement here though. You can’t have too much fo that.
oshen,
welcome to capitalism………. :o)Join in with whatever ethics or ideals are important for you. This will identify you as a business person and others will react accordingly.
I personally stepped over the line of being too nice and too soft and got “taken advantage of”. (I AM NOT SUGGESTING THIS IS YOU, JUST STATING THAT I WAS)
I have readjusted my attitude to be firmer and am doing much better.
Fair and honest goes a long way.
Sheer money driven greed also works for some.
Beware, and good luck.
:o)
Live, Learn and GrowLifexperience
Being to soft or too generous just does not work in this day and age. Too many people are way too quick to take advantage and will not return the favour when it is needed. I also learnt this the hard way!
TMA
http://www.email4money.info
Investor Links
First Home Buyer WebsiteI agree. Being soft and too generous is not fair on yourself. It’s also not fair on the other person because you are creating the opportunity for them to do the wrong thing. That’s why I say I don’t care about how much people complain, as long as I know that what I’m doing is right. Which of course it isn’t always, but it is what I aim for.
Hi Oshen,
You are experiencing the challenge of balancing good business with good behaviour to your fellow man. Congratulations for seeing the fact that they can and do exist side by side, and are not mutually exclusive. As a the manager of a retail business, I am often beset by the same question myself. Although a complete newbie to the property apect of these columns, and reading and learning as much as I can from more experienced investors like yourself about property specifically, I would like to offer you the following ecouragement with this Customer Service issue. You are running a business- Fact. You want to be fair and kind to your Tenants- Fact. You seem not to percieve this as an adversarial situation- Fact (and an excellent customer focus too.) In my business it is the service I give my customers which far outweighs the price of my products. A business which focusses all it’s attention on selling for the cheapest price is setting itself up for a fall. I tell my crew to “Always mind the customer, and the sales will mind themselves.” This is not done in a blind manner, however, because some people just want the cheap price. These customers generally show little loyalty to any supplier of products and services, and will switch as soon as it suits them to do so. A long term loyal customer continues to be an ongoing source of revenue, in some cases for many years. As long as the business is running at the appropriate levels of profitability, it is a win/win.
Some customers take bad news better than others, it is true, but your own approach is the key. When dealing with customers on difficult issues, if you expect them to be unreasonable, 9 out of ten times they will be. But if you expect them to be sensible, fair, and reasonable, then 9 out of ten times they will be! Might sound a bit far fetched to some one not involved in sales, but- this is what I do, and it works.
I’m sure that if you take time to prepare your information before discussing the needed rent increase with your customer, and include the information that you enjoy having them as your customer and wish to continue the relationship, but contrast what will be required fiscally if the property continues to run at a loss, you will maintain what to a complete property novice like me seems to be a very valuale asset- a loyal, happy, and income producing customer.
Good luck, and all the best
Jim
You must be logged in to reply to this topic. If you don't have an account, you can register here.
