If you know what you can and can’t do as a landlord and follow the rules there are some simple and cost effective ways you can legitimately increase your rent and help maximise your rental return.
Generally, during the fixed term of a rental agreement you are not allowed to increase the rent of a property unless you give the tenant a minimum of 60 day’s notice.
The exception to the rule is when the agreement is fixed for a period of less than 2 years. Where that is the case, unless a specific term was included in the original agreement to cater for a rental increase then the rent cannot be raised.
When a tenant is on a periodic agreement, meaning the original fixed term of the rental agreement has expired, the rent can be increased but only after giving appropriate notice.
There are also a few other important requirements which need to be followed before any rent increase can take effect, namely: the notice being in writing and signed and dated appropriately, the proposed rent being clearly stated and the date the proposed rent is payable from being clearly spelt out.
There are many ways you can increase the rent of your investment property, but there are a few methods that will more quickly enable you to maximise the return you are getting.
As a landlord, it is important that you keep up to date with the market. If you have outsourced the process of looking after your rental property to a property manager then this role sits fairly and squarely with them.
Keeping on top of the market will help you determine if you are getting market rent for your property. If not, it will signal that it is time to increase the rent in accordance with the required notice period.
In my role as a buyers agent I hear so many people complain about how they never hear from their property manager. This is something as a landlord you should never accept. Regular communication with your landlord is an absolute MUST.
Quick and easy cosmetic updates are a sure-fire way to help you to increase your rent. In fact, certain tweaks and convenient updates are often appreciated by a genuine tenant.
Look for things that you can do to your property that will add value and increase its overall appeal, either for a current or future tenant.
Improvements to an investment property that are usually well received by a tenant include: air-conditioning, dishwasher, re-painting, replacing taps, water saving devices, security screens, fly screens, installing a new (and larger) hot water unit or providing a gardening service.
By providing value add improvements to your investment property you should be able to up the rent a little, which will essentially help cover the cost of the item over time.
Change is good. As a property investor change sometimes means saying goodbye to a reliable long standing tenant and taking a risk on someone new, but at the same time getting a much higher rent for your property in return.
Strangely, many people don’t put the rent up on their investment property because they feel bad or they don’t want to upset the tenant. While this is a lovely and generous notion the whole idea of buying an investment property is to build wealth by increasing your income, minimising your tax and growing the value your asset. How can you do that if you are literally throwing away money?
Failing to increase the rent on your investment property when market conditions justify it, is one of the worst mistakes a property investor can make. The last thing a tenant wants is a nasty surprise. Small justified rental increases are much better received by a tenant than one large increase after doing nothing for many years.
As you can see from the above, there isn’t a great deal of cost involved in increasing your rental return but there is some effort and skill required in keeping track of and on top of what needs to be done.
This leads me to who should take care of your asset. Amongst other things an experienced property manager will schedule all relevant inspections and rental reviews of your property and continually look for ways to increase your rent while keeping a good tenant on side at the same time.
In my view a great property manager is worth their weight in gold and will do a much better job than the average person trying to save a few dollars by managing their investment property themselves.
Has it been a while since you heard from your property manager? If so, maybe it’s time to consider a new one.
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Shelley Horton is the founder of Sydney based exclusive buyers agency Albion Avenue. With a 20 year career honing her skills in every aspect of the property industry Shelley knows what makes a property worth buying and how to get the best deal.
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