One question we are often asked by landlords is, when’s a good time to raise the rent? Landlords do need to increase rent over time, just to keep up with the level of inflation and cost of living, as well as, of course, to give a bit of extra cash in the back pocket!

When tenants have given their notice and you’re looking for new ones, it’s easy to put a few more dollars on the rental income, and to advertise the property at the new rate. That is, if it’s in line with the present market rate.

However raising rent for existing tenants can be a difficult issue and does need some careful thinking through; sometimes in the tenant’s eyes, the rental increase may not be justified.

Here are some points to consider when thinking about rent rises:

Assess the market

Rental prices are very much determined by what people are prepared to pay. Obviously a penthouse with sea views will attract a higher rent than a property

The first thing to do is to assess the market and look at what similar sized properties in the same condition and area are been rented out at. If your property is on a par, but you’re charging substantially less than the going rate, you may be justified in a rental increase.

Keep it legal

You can’t actually increase the rent when you feel like it and there are certain legalities you need to adhere to. For instance during a fixed term agreement of less than two years, the rent cannot be increased unless a term has been added to the agreement.

If the fixed term period of the agreement has ended and the tenant is on a continuing (periodic) tenancy you can increase the rent, but you still have to provide the minimum 60 days written notice before the increase can take effect.

Landlords also need to be aware their tenant can apply to the Tribunal within 30 days of receiving the rent increase notice if they believe that a rent increase is excessive. The Tribunal has the power to set the rent for the next 12 months.

Visit the NSW Office of Fair Trading website, https://www.fairtrading.nsw.gov.au/housing-and-property/renting/during-a-tenancy/rent-increases, for more information.

Be realistic

If you have recently made improvements to the property, you may be justified in increasing the rent, but be realistic in the amount you increase it by. Replacing a worn carpet or painting a tired exterior may actually be what is expected at the current rate, and a rental rise may not be justified.

If however you’ve made some serious upgrades, such as installing air conditioning or putting in a new kitchen, then you may be justified in raising the rent.

Is it worth it?

Ask yourself this question, is raising the rent by an extra $50 a month really worth it if the tenant hands in their notice?

You do need to factor in the cost of finding new tenants, and the risk of the property sitting empty for a period of time while you wait to find tenants willing to pay the higher price. These costs will all add up. You need to do some sums to make sure any outgoings made as a result of your tenants leaving will cover the annual increase of, for instance the $600 per year you stand to make if you do increase the rent by $50 per month.

If you have a good tenant, who is paying on time and caring for your property, we say hang onto them! It’s sometimes worth leaving the rent at the same rate for the next couple of years than run the risk of your property being empty for a couple of weeks while you try to find new ones.

Want some more landlord top tips or information on investment property? Our experienced team loves to talk and share its knowledge! Give us a ring on 02 4956 9777, send us an email to mail@newcastlepropertymanagement.com.au or pop into our Cardiff office for a chat.

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