How much and how often can I increase the rent of my investment property?

It’s a question every landlord asks themselves at some point: how often, and by how much, can I increase the rent on my investment property or properties?

RentsThere’s actually two parts to the answer – how often you can increase the rent, and how often you should.

On the one hand, there are legal limits you’ll need to be aware of, while on the other hand you need to use your market knowledge and common sense to ensure planned increases are in-step with local medians and supply.

Ideally, as a property investor you want to do all of this while avoiding lengthy periods of vacancy, or losing your terrific, reliable tenants.

It sure is a minefield, and there is no “one size fits all” answer – but the insights below should help you make your decision about raising the rent.

First things first: know how often you can increase the rent

This is the non-negotiable legal requirement that limits how often and by how much you can put the rent up.

If your property is in Queensland, Victoria, Western Australia or the Northern Territory, and your tenant has a periodic lease, you may only increase the rent every six months.

If they have a fixed-term lease, you can only increase the rent if there is a clause in the lease that allows for this – otherwise, you’ll need to wait until the current fixed term expires.

In Tasmania, South Australia and the Australian Capital Territory, rents can be increase just once per year.

Landlords in New South Wales can increase rents for fixed-term agreements once per year, if the lease allows it.

There is no limit in NSW for rent increases on periodic tenancies.

In the NT landlords must give the tenant 30 days’ notice, while all other states require landlords to give their tenants a minimum 60 days’ notice if they intend to raise the rent.

In most states, tenants can appeal to an Administrative Tribunal within 30 days if they feel the proposed increase is excessive or unfair.

You can increase the rent… but should you?

You’ve already determined that you’re within your legal rights to raise the rent, but that doesn’t mean it’s necessarily a great idea.

Apartment Market

It’s now time to review the market, to determine whether the environment is ripe for an increase.

Review other comparable local listings, with the same features as your property.

How much are they being advertised for?

What’s the median rent in the suburb for a dwelling like yours?

And importantly, what is the vacancy rate?

If it’s tight, that’s great news – a rent increase could be a wise move.

Your tenants are unlikely to move out, and even if they do there should be a fresh batch of new applicants queuing up to sign a lease.

But if the vacancy rate is high, proceed with caution.

The property may end up sitting empty for several weeks or months, potentially eroding any gains you stand to make from the higher rent.

House Model On Top Of Stack Of Money As Growth Of Mortgage Credit, Concept Of Property Management. Invesment And Risk Management.In terms of how much you can increase the rent, there are no hard and fast rules.

However, you should be guided by the consumer price index and the asking rent for comparable properties in the area.

If your tenants do decide to dispute the proposed increase, these are the factors a Tribunal will look at to determine whether the increase is reasonable.

Finally, consider the calibre of your tenants when planning rent rises.

If you’ve got long-term five-star tenants who treat the place like their own, it could pay to be a little more conservative with rent rises, or at least open to negotiation.

That doesn’t mean resting on your laurels and letting the rent stagnate for years, though!

Smaller, regular increases are unlikely to drive your tenants away, and they enable you to protect the viability of your asset while still keeping it affordable.

If you’re attentive to maintenance requests, treat the tenants with respect, and have a great property manager who has built a rapport with them, an increase of $10 or $20 per week isn’t going to scare them away – and ensures that your investment property continues to move your financial position forward.

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Leanne Jopson

About

Leanne is National Director of Property Management at Metropole and a Property Professional in every sense of the word. With 20 years' experience in real estate, Leanne brings a wealth of knowledge and experience to maximise returns and minimise stress for their clients. Visit: Metropole Property Management


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