When and how often should you increase rent?
Your investment property may be someone else’s home, but to you it’s an income-producing asset. So it’s important to carefully consider the question: how often you should increase the rent?
Some investors choose not to increase their property’s rent on a regular basis because they don’t want to upset the tenants. They feel that having a tenant who cares for the property and causes no headaches is worth losing a few dollars in potential profits, so they don’t impose a rental increase for six months… Then 12 months… And before they know it, years have passed with no rental increase whatsoever.
At the end of the day your goal is to make money from your property, so while giving your tenants a discount may be doing them a huge favour, it does no favours to you and your long-term investment goals.
You should review your property’s rental rate every six months – but that doesn’t mean you should necessarily increase it, it always depends on a number of factors.
Just as real estate prices change and sales markets evolve from month to month, so do rental markets.
When vacancy rates are tight the market is more competitive. When vacancies are really low this can put pressure on asking rents and allow landlords to increase their profits by pushing up the rent.
But when vacancy rates are high it can be harder to find a tenant. Landlords can find themselves discounting their asking rents.
At Property Boutique, our property management team always advise our owners on current market conditions, to ensure our properties are well priced within the current market.
» For rent to be increased, it must be at least 6 months since the last increase.
» Rent cannot be increased during a fixed term agreement unless it is stated in the tenancy agreement along with the amount or how it will be worked out. Even if rent increases are allowed, 2 months’ notice in writing must be given.
» Rent may be increased at the end of a fixed term agreement if you and the tenant enter into a new tenancy agreement.
» Rent can be increased in a periodic agreement by giving 2 months’ notice in writing. You cannot increase the rent because the tenant breaches the agreement.
Decreasing the rent
Rent may be decreased because:
» there is a drop in the standard of the property, or
» there is a decrease in services provided (e.g. a stove is not working).
If you have any further questions or want any further information on the current rental market, please get in touch with us. We would love to be of assistance and ensure your property is being rented for the right price.