Rent reviews – to increase or not to increase? That is the question!

29-Feb-2016

Prompt and ongoing rent payments are the lifeblood of any property investor. 

That’s why we suggest maintaining rent levels at or slightly below market levels in order to keep pace with increasing costs and ensure the tenant doesn’t vacate due to an above market rent increase.

Tenants are better educated today and are aware of the going rate for a certain type of property in a given location. This information is readily available to them simply by navigating the various Internet sites available.

So how do we determine when it’s the right time to increase the rent?

When considering a rent increase we take into account the following:

  • The nature in which the tenancy is being conducted, and
  • How the property compares with others currently on the market.

We also ask ourselves the question, “If the property became vacant today what rent would it realise”?

Sometimes the result of this process is a recommendation to leave the rent level unchanged due to market conditions.
In our experience, properties for which investors increase the rent to above market levels have higher vacancy rates than those for which rents are maintained at or slightly below market levels. Therefore, increasing the rent to above market levels is false economy as it results in a higher turnover of tenants, high vacancy rates and lost income.

By increasing rents to slightly below market rent, your tenant is aware that they are not being ‘rent gouged’ and are therefore more likely to remain in the property. This ensures full occupancy for you and a continuing income stream.

At the end of the day our job is to maximise the income for your investment property. We achieve this by not only increasing rents but also ensuring that you have a steady income stream and lower vacancy rates. Maintaining rents at or slightly below market level achieves both objectives.