Did you know that keeping the rent super low for your tenants is not actually the kindest thing to do?

If you keep your rent way below market value, and the tenant is there for 5, 10, 15 years, and you decide to sell or move back into the property, your tenant is then in for a world of pain and will struggle to find something even close to what they had.
I have heard of tenants going into homelessness as a result as they just can’t afford the sudden jump. I am not talking about median rents at $450pw, but the peppercorn rents that still exist out there for $200pw, and the fact remains that there is very little rent in Adelaide under $350pw.
Sometimes I take on a property where this has occurred and the rent has stayed the same for a long time, or it is drastically under market value, and this needs to be brought up closer to market value.
I have had many conversations with tenants by getting them to have input into the decision, explaining the situation about the need for an increase, encouraging them to go have a look at the current rentals and see what they can find in the area.
I am generally vague about what the increase needs to be, and I try to get them to see it from the landlords side so they can feel buy-in and involvement in the process, rather than a letter emailed to them with a huge increase.
The best outcome is if I can get a suggested increase from the tenant. Generally this will be under what the landlord is seeking, and this is where I get to put my negotiating skills into place to find a good outcome for both parties.
Usually landlords feel bad about finally increasing the rent, and are happy to offer a “discount” on market rent, while still achieving a higher amount. This is important to ensure that loyalty is rewarded also.
Doing it this way, will generally get a far better result overall, than sending an impersonal letter, and results in a tenant happy to stay, than one who stays out of necessity. This is never an easy conversation, but sometimes is necessary.
Do you know how your property manager is conducting rent increases for your tenants?
The way to avoid this entire situation (notwithstanding the current crazy climate) is to do a $5 or $10 increase every year. This might mean that rent may still be under market value in the event of the market outperforming, but the gap won’t be so large.
The cost to move is estimated to be $1000-$3000 so most tenants are happy for a small increase each year.
But if you are in the situation where the rent needs to increase a significant amount, kindness and understanding goes a long way, and starting that process as early as you can so the tenant a) feels they have other options if they need to, and b) to allow them time to process that. In the information age, tenants are very aware that landlords have increasing costs, and you’d have to be living under a rock to not know about the interest rate rises!
It won’t always be this way either, at some point the market will change, and tenants will have more choice, so whilst its difficult for tenants now, it has been difficult for landlords for many, many years. It’s all about perspective.
If you want your tenants to have a better experience from the day they move in, to the day the rent is reviewed, give me a call to understand how it's done on 0426 241 676 or hello@tayloredproperty.com.au
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