Rent increases – how much and how often

How much and how often should you increase the rent of your investment property is question every landlord will ask themselves. There are legislation requirements around rent increases about when to increase the rent, along with an understanding of market forces and common sense about how much to increase the rent.

As a property investor, you want to be able to balance this, while avoiding long periods of vacancy, or losing ideal tenants. There is no standard answer to this age-old question about rent increases, but in this video, Joanne Danckwardt of One Agency JD Property Agents, discusses some insights you should be aware of to assist with your decision about raising the rent.

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How often can you increase the rent?

Legislation will dictate when and how often the rent can be increased. In NSW, the laws relating to rent increases will vary depending on the type of tenancy.

• Periodic Lease Agreement
  If the lease agreement is not within a fixed term lease timeframe, the rent can only be increased once in a 12 months period. The landlord must give the tenant at least 60 days written notice of the increase. The notice can be sent before the fixed term ends; however, the start date must be after the end of the fixed term.
• Fixed Term Lease Agreement
  If the lease agreement is still within its fixed term, and is less than two years, the rent can only be increased if the agreement sets out the increased amount or how the increase will be calculated. The landlord will not need to give the tenant written notice of the increase, as it has been built into the agreement. For lease agreements with a fixed term of two years or more, the rent can only be increased once in a 12-month period, with the landlord required to give the tenant 60 days written notice of the increase.

Tenants can negotiate with the landlord to lower or withdraw the increase, or they can appeal to the NSW Civil and Administration Tribunal (NCAT) within 30 days if they feel the proposed increase is excessive or unfair.

How much should you increase the rent by?

If you have determined that you are within your legal rights to increase the rent, the next question/s is should you and if so, by how much? Consideration should be given to factors such as:

• Review the current market – is the environment right for an increase?
• How much are similar properties being advertised for?
• What is the median rent in the suburb for a property like yours?
• What is the vacancy rate?

If the market conditions are right, a rent increase could be the right move. Your tenants may be unlikely to move out, and if they do, you may have the option of a number of new applications ready to sign a new lease agreement. If market conditions are not favourable for an increase, then you may wish to re-think increasing the rent and having the property unnecessarily vacant.

There are no set rules when it comes to how much you can increase the rent by, you should be guided by the current market conditions, the asking rent for comparable properties in the area, and the consumer price index. If your tenant does decide to dispute the increase, these are the factors that the Tribunal Member will look at when determining if the increase is reasonable or not.

You should also consider the quality of your tenant when planning a rent rise. If you have a long-term, five-star tenant, who treats the property like their own, it may pay to be a little conservative with rental increases, or at least be open to negotiation. That doesn’t mean not ever increasing the rent, and allowing the property to be under rented. Small, regular increases are unlikely to push your tenants away, and they will allow you to protect the viability of your asset, whilst still keeping it affordable. By attending to maintenance requests, treating your tenants with respect, and having an ideal property manager who has a rapport with them and offers comprehensive property management services, small increases will not affect tenant sentiment, and ensure that your investment property continues to move your financial position forward. By carrying out accurate and regular rent reviews, and keeping rents at or just slightly below market rates, you will continue to manage the expectations of your tenants, while ensuring that you are always maximising your cash flow, and therefore the returns on your investment, all while taking into consideration key aspects for renting out your property.

If you would like to know if it’s time to increase your tenant’s rent, feel free to contact our office on 4285 7400 or email on jdpropertypm@oneagency.com.au.

If you're ready to discover how you can rent out your property with confidence, download our free Step By Step Checklist to Renting Your Property with Confidence.

YES, DOWNLOAD MY CHECKLIST

If you feel you, or someone you know could benefit from our experience with property management, we’d love to hear from you. Simply reach out.  We hope that has helped you today. If you have any questions, we’d love to talk to you. Our number is 0426 264 771 or 0455 147 755.