Determining an acceptable increment by which to raise the rent needn’t be hard; with the right advice, it can be simply calculated, says Rob Farmer, CEO of Run Property.
“In Australia at the moment, rents are moving at different rates depending on where the property is and the type of property,” Mr Farmer says. “Speak to a good agent and ask them for comparable properties.
“I also like to start leasing the property higher than the expected rental amount and see if there is enquiry at that level,” he adds. “If not, then reduce.”
Good tenants can be hard to find and no landlord wants to lose a quality tenant over something as basic as a rent increase.
To avoid a rental increase catching tenants off guard, sending them packing, landlords should establish several routines to broach the issue.
To get tenants accustomed to rent increases, landlords should raise rents regularly but in smaller doses, market permitting, rather than waiting and then laying down a hefty raise in one hit.
“We recommend increasing rents annually, even if it is just a small amount, so that you build in an expectation that the rent will increase each year,” says Lisa Indge, managing director of rental property management company Let’s Rent.
“Many landlords keep the rent low only to realise the property is below the market rent and then put through a large raise which increases the risk that tenants will move on.
“Small increases are more palatable to tenants,” she says.
Make the best of peak periods
Rental demand is higher at some parts of the year than at others, so try to take advantage of high-demand periods by scheduling your lease to run out around those times. That way, your property won’t stay vacant for long.
“Seasonally, rental demand is strongest in November, January and February so if you can have a lease that expires around these times, it’s good,” says Ms Indge.
“If a tenant is on a rolling lease, choose a seasonally strong time of year to process and get them back on a lease.”
At these ‘peak’ times tenants are also more likely to be willing to pay a higher rent to secure a property.
While six- or 12-month leases are the ones most commonly used and it can be tricky to get these contracts to fall in line with prime letting periods, you are under no obligation to enforce these standard-length periods.
If your leasing arrangement is not due to come up for renewal or commence during a high-demand letting period, sign up your tenant for the number of months until the next peak to take advantage of the seasonal highs.
Top ways to increase your rental return
While the last thing an investor wants is for their property to be untenanted, vacancy periods can actually be a great time to fix up any problems or install new fittings to increase your property’s yield.
Key improvements include:
• Replacing all worn out and tired-looking items, such as kitchen and bathroom handles, carpets and blinds
• Applying a fresh lick of paint to catch the eye of prospective tenants – particularly to scuffed up and grubby areas, such as kitchen cabinets, as well as to the outside of the property
• Installing stainless steel appliances to create the impression of a modern, expensive kitchen
• Installing highly sought-after but not ‘budget breaker’ items, such as air conditioning, ducted heating, dishwashers and built-in cupboards
• Keeping your property looking neat, tidy and clean – perform little maintenance jobs, such as mowing lawns and removing all rubbish in or around the property
• Adding a carport, ensuite or even an extra bedroom to increase the property’s overall value and appeal
• Installing an internal laundry behind bi-fold doors, especially in apartments with shared washing facilities or properties with external laundries
• Installing security features, such as deadlocks on doors or security screens, to give tenants – especially those living alone – some peace of mind
• Fencing your property, not only to provide a sense of safety and make the space more functional but also to improve overall appearance
• Providing for pets, a rare but highly valued option (although with apartments you would need to check that body corporate by-laws cover this)