How To Increase The Rent On Your Investment Property

As a landlord, the idea of increasing the rent on your investment property can seem appealing, but anything but straightforward.

We take a look at when and how to raise the rent.

What is the Perth rental market doing?

When you’re thinking about raising the rent on your investment property, it’s important to firstly factor in the current state of the market. Does it support a rent raise?

At the moment, Perth’s rental market is a landlord’s market. That means that vacancy rates are low (0.7% in December 2021, according to REIWA, the lowest they’ve been in forty years), and available rental properties tend to be snapped up quickly (REIWA reports that the median leasing time in February was 16 days, three days faster than the same time last year). This drives competition amongst would-be tenants for available rental properties, which, in turn, pushes up rents. Here in Perth, REIWA reported that median house rents rose by approximately 10% last year to reach $450 by December, while median unit rents rose by a similar percentage to hit $410. If you haven’t reevaluated your rent in a while, these market trends indicate that now is a good time to do so.

What are the rules about rent increases?

The WA laws about rent increases vary depending on the type of tenancy, but the one common rule is that the rent cannot be raised more frequently than once every six months.

Tenants on a periodic lease (that is, one without a fixed end date) must be given 60 days’ written notice of a rent increase. Meanwhile, if your tenant is on a fixed-term lease, you can only raise the rent if the lease includes details of how much the rent increase will be or the method by which it will be calculated (such as a percentage of the current rent). The rent can’t be raised until six months into the tenancy agreement and six months after the last increase, and the tenant must be given 60 days’ notice.

There are standard forms to use, to notify tenants, which are downloadable from commerce.wa.gov.au.

How do you go about increasing the rent?

The key to a successful rent rise is to ensure that the rate you’re charging is in line with the current market. Even in a landlord’s market, it’s important to be realistic about the rent you’re asking for your property. After all, it always makes more financial sense to have a tenant paying a slightly lower rate than an empty property and a costly vacancy, no matter what the market is doing.

If a fixed-term lease ends, but the tenant stays on, either under a new fixed-term agreement or on a periodic basis, this is a common and convenient time to increase the rent. Just remember that the law states that rent increases must not take place in the first 30 days of the new agreement, so any rent increases will need to take effect after that time.

It helps to remember that any rent increase, no matter how modest, will have an impact on your tenant. That’s not to say you shouldn’t raise the rent, but just that doing so in a reasonable and measured way is the best way to retain your tenants, minimise the costs associated with finding a new tenant and ensure an uncomplicated tenancy into the future.

If you’re considering increasing the rent on your investment property, an experienced property manager can provide all the advice and guidance you need. Get in touch with our expert team today.

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