All Topics / General Property / Request to lower rent.

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  • Profile photo of LalibellaLalibella
    Participant
    @lalibella
    Join Date: 2007
    Post Count: 116

    Our PM informed me today our tenant has presented a written request to lower the rent by $100 to $150 per week.  Current rent is $460

    Current mean rent is approx $400, which I was unaware of. I have agreed to $400 and am waiting the tenant's reply. (he is on a 6 figure income…yes I know, not relevant. Just had to include that.)

    Anyone else had a similar experience ?

    Profile photo of rhino101rhino101
    Participant
    @rhino101
    Join Date: 2008
    Post Count: 31

    Where is your IP situated?

    Yep, I have had similar in the past – usually seems to occur when supply exceeds demand and vacancy rates are going up. Puts the tennant in the drivers seat as they know that if you don't agree they can walk and get a better place for cheaper rent elsewhere. Sometimes it's a bit of a bluff as they are the ones that will then have to pack up all their furniture and go through the 2nd most traumatic event in life aside from a wedding (moving house!). On the other hand if they are a great tennant who looks after the place and pays on time it might be worth lowering rent to meet the current market as an alternative to losing a great tennant and having an empty property.

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    I've never heard of such a big drop in rent. What's the vacancy rate like?

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of wilko1wilko1
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    @wilko1
    Join Date: 2010
    Post Count: 510

    Mining or satellite town? 

    Profile photo of LalibellaLalibella
    Participant
    @lalibella
    Join Date: 2007
    Post Count: 116

    Mining.  NSW

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,018

    Needless to say it says it all.

    All good when it is going up but can be very volatile.

    We would never put a client into a mining area full stop.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
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    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    Lalibella wrote:
    Mining.  NSW

    OK, that explains it. They can be quite volatile – in both yield and property values.

    Is the PM confident that they can secure another tenant if this one decides to walk? 

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Tony FlemingTony Fleming
    Participant
    @the-dark-knight
    Join Date: 2008
    Post Count: 396

    Is the property in good condition?

    Tony Fleming | Triumphant Property Group
    http://www.triumphantpropertygroup.com.au
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    NSW Buyer's Agent specialising in Western Sydney-Blue Mountains-Orange-Albury

    Profile photo of kong71286kong71286
    Participant
    @kong71286
    Join Date: 2009
    Post Count: 261

    Main issue with lowering rent is it will lower the value of the property

    This is the formula provided in some of Steve's seminars:

    Price = Annual Rent / Yield

    Instead of offering a lower rent, it was suggested to offer a rent free period

    Profile photo of jenni_nextplace.com.aujenni_nextplace.com.au
    Member
    @jenni_nextplace.com.au
    Join Date: 2013
    Post Count: 36

    Mining areas do fluctuate a lot. Generally the properties rental market value is much much higher than in the rest of Australia. 

    Look at the future volatility of the area and the mining company. If mining production is slowing and the tenants are great tenants and you are still receiving a great return and can secure them on a long lease could be worth looking at. 

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