I am buying a 50yo block of 4 flats in ok (but dated) condition that are all tenanted with people on expired leases. Some have been in there for a few years. They are renting for about $150 each and 2 other property managers in this area have confirmed what I suspected-true rental would be about $200 each.
How do I legitimately but rapidly get the rentals to market value? Can I just buy them and then whack up the rent to $200 after settlement or do I have to do it in little increments of $10-$20 every 6 months and drag it all out?
Thoughts and advice would be good.
If they are on expired leases you can put the rent up any amount you want. They MAY take you to tribunal but if it within market rent you shouldn't need to worry.
Some REA suggest the slow method but if it is so far under rent that's too much money to loae by doing it that way. Go to another agent if they suggest that.Check out Real Estate.com to check current rents. If you really don't want them all to move out maybe raise them to just under market rent (say $180-190) then increase again in 3-6 months. You'll find that once they look on the net they'll relise they can't get anything at that price so they'll stay. If one does move out you could use the opportunity to reno one and get even more rent.
Catalyst wrote:If they are on expired leases you can put the rent up any amount you want. They MAY take you to tribunal but if it within market rent you shouldn't need to worry.I thought there was a limit to how much you could increase rent in one go.
Thanks for your comment though, all that does make good sense.
NO. Agents tell you that all the time.
The only reason people don't do it is because the tenant CAN take you to tribunal. But if it's way under market they don't really have a case.
I've put some up $40 a week after buying ones that had low rent with no arguments.
Risk v Reward. Buy the property vacant possession. If the existing tenants want a new lease, market rent (taking into account the condition of the property).
There is no limit as to how much a rent increase can be however it must be supported by market rent. It will take 60 days or longer for the new rent to be effective, provided that there is no objection to the increase.
Scott No Mates wrote:Risk v Reward. Buy the property vacant possession. If the existing tenants want a new lease, market rent (taking into account the condition of the property).There is no limit as to how much a rent increase can be however it must be supported by market rent. It will take 60 days or longer for the new rent to be effective, provided that there is no objection to the increase.
Yes I thought of that. I just have a bit of moral difficulty with the concept of turfing people out of what has been their home for a few years. But I suppose I should harden up a bit and get less emotional. I just hate stuff I own underperforming. Then it feels like I'm subsidising someone I don't even know nor personally care about (the tenant I've never met.)
Sounds like you got a good deal on your hands, House Call! Nice one! Where are these flats of yours?
Jacqui Middleton | Middleton Buyers Advocates
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australia-that big island of the north coast of tasmania
In some states you can't buy with vacant possession. You have to take over the leases until the leases expire. I don't know what the situation is in Tasmania.
How desirable is the area for rental? Would it be easy to get tenants at $200 pw? If hiking up the rent by so much means that potentially you will have trouble getting tenants, it may be worthwhile upping the rent to $180pw and try to keep the current tenants in.
Tenants are your best asset. Look after them.
Cheers
K
Linar wrote:In some states you can't buy with vacant possession. You have to take over the leases until the leases expire. I don't know what the situation is in Tasmania.
How desirable is the area for rental? Would it be easy to get tenants at $200 pw? If hiking up the rent by so much means that potentially you will have trouble getting tenants, it may be worthwhile upping the rent to $180pw and try to keep the current tenants in.
Tenants are your best asset. Look after them.
Cheers
K
Only one tenant has a lease. To be honest your whole summary was my assessment of the best idea, too. Put rent up to a bit less than market rental but a lot more than current. 3x$30/wkx52weeks=$4500 approx. I have to do it or it is not worth buying.
Vacancy rate is <2%. Area v desirable (near hospital, Tafe businesses etc etc)
I agree about looking after tenants, just want good money since I am not doing it for charity.
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