It seems pretty simple – as an investor, you’ve bought your property to make money for your future, so you might want to raise the rent to boost that income and meet mortgage repayments.
But in reality, there are a lot of different factors that control when you can and should increase the rent, not to mention ways to go about it that will help retain your tenants long-term.
Here’s everything you need to know about when and how to increase the rent on your investment property.
Legal obligations for rent increases
The laws around rent increases change based on the type of tenancy – fixed-term or periodic (often called month-to-month).
In a fixed-term tenancy, where there are set start and end dates, it’s not possible to increase the rent unless there are details about the rent increase in the written lease agreement. If these details are in the lease, the rent still can’t be increased within the first six months of the tenancy, or until six months after the previous rent increase. If the tenant stays in the property after the end of the agreement, you’ll need to wait 30 days after the new tenancy starts to up the price.
For periodic tenancies, the rules are quite similar. The rent can’t be increased within the first six months, no matter how long the tenancy is, plus it can’t be increased more often than every six months after that.
In both fixed-term and periodic tenancies, the tenant must be given 60 days’ written notice of the rent increase. Not abiding by these rules can mean the tenant doesn’t have to pay the new amount, so it’s important to make sure you tick all the boxes. An experienced property manager can help you navigate these steps.
Factor in the market conditions
Rent increases aren’t just about when the law will allow you to up the price. Market conditions should play a strong role in any decision to raise the rent, and help in deciding by how much.
If we take a look at Perth’s rental market, we can see that rental prices have declined about 25% in just shy of a decade as a result of reduced demand. This has been bouncing back in the past year or so, with recent REIWA data showing that vacancy rates were at 2.3% for the year to November 2019, while median asking rents for houses in some areas were also on the rise.
This growth provides the best opportunity that we’ve seen in a while to reconsider the rent on your property, but you need to take a realistic view and make sure your price is in line with the market.
If tenants feel that you’re asking too much, they can request a reduction from the Magistrates Court, but they’re much more likely to simply leave and look for a new home when the lease is up. These unnecessary vacancies can be costly in any market, and could have a huge impact on a landlord’s income.
An experienced local property manager will have a detailed understanding of what is happening in the wider market, so they can advise on appropriate changes to your weekly rent. Get in touch with us today to arrange a chat.
Consider your tenants’ point of view
We understand that as a landlord, it’s easy to look at rent increases from a purely financial standpoint. It’s a business decision, after all. But if you take a moment to remember that higher costs do have an impact on your tenants, it allows you to approach the increase in a respectful way that is more likely to retain your tenants, and result in a well-cared-for property, a smooth tenancy and reduced turnover costs.
We believe in going the extra mile to make this happen for you and your tenants. Don’t hesitate to get in touch about working with us now.