There is a real love/hate relationship with rental increases; landlords love them, tenants hate them!

Everyone wants a good bang for their buck, but like tax, rental increases are generally one of life’s certainties, and most tenants expect a rental increase at some point.

While there are many arguments for not increasing the rent, such as keeping good tenants, ensuring the property remains competitive, and in some cases, when the property is negatively geared, however, there are also some very good reasons for increasing the rent too.

Here are three reasons you should consider increasing your rent:

1. Look at what the rental market is doing

When considering rental increases, property investors should also consider what the market is doing and what their property’s rental value is worth.

• Rental vacancies

Over the past 12 months, our figures have shown rents have increased by 5.4% over the last 12 months. Vacancy Rate for Newcastle/Lake Macquarie was overall 1.7% according to the REI Statistics in April, but our vacancy rate was much lower, 0.4% in April and 0% in May!

So right now, we have very low vacancy rates, despite these rental increases. We certainly agree with looking after great tenants, and rewarding them by keeping their rent low, but be realistic; reward your tenants by keeping your rent at, for example, $10 to $20 below market rent.

• Improvements

If you’ve spent money on making substantial renovations and improvements to the property, ie above the usual maintenance and repair on wear and tear, it stands to reason, you can ask for more rent.

• Strategic thinking

An investment property is your business, and you do need to think strategically. If you want to sell the property, and the buyer is an investor, they do need to have a realistic rental value on which to make their purchasing decision.

2. Being fair to your tenant

Keeping rents at well below market price may become a problem for tenants when you come to sell the property, or if the tenant experiences a change in circumstances and they have to give notice.

If a tenant is in a property for 5 to 10 years and is paying rent at the original or near original rent, they often have no idea they are receiving a great deal (very often, in our experience, tenants only generally check the going rate when they receive a rent increase).

So, when the tenant needs to move, for whatever reason, they may discover they are having to find an extra $100 to $150 per week. This potentially may be a problem when they apply for new properties; owners/agents will question whether they will be able to afford the step up in rent, and may decide to go with another tenant who they feel can more comfortably afford to pay the rent.

So, if you don’t increase the rent, you could potentially be keeping your old tenant out of the market if your or their circumstances change.

3. Extra in your back pocket

Unless your property is negatively geared, an increase to your bottom line is usually a good thing. OK, an extra $120 or $240 a year may not make a massively noticeable difference, but it still helps with working towards your financial goals.

The legalities of rent increases

If you are planning to increase rent, you need to give your tenants a written notice at least 60 days before the rent is increased.

You can increase rent once in a 12 month period for fixed terms less than two years. For fixed terms more than two years rent increases can only happen if the agreement already states the amount or the method on how the increase will be calculated.

Tenants have rights, and if they are not given adequate notice or not notified in writing, they can refuse to pay the rent increase. If they feel the rent rise is unfair or excessive, they can also apply to the NSW Civil and Administrative Tribunal (NCAT) within 30 days.

We believe you should increase rents at intervals, but do give discounts on the going rate to encourage good tenants to stay. As we have a good professional working relationship with tenants, we very rarely are questioned when they receive a rent increase notice.

If you want to know more about our property management services, and why we consistently achieve below average rental vacancies, get in touch. 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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