Your investment property has been successfully tenanted for years but are you receiving the right returns? Landlords often fall into the trap of renewing a tenants’ lease at the same price without reviewing the market. You could be potentially missing out on thousands of dollars per year due to missed rental increases.
Rental prices should only be increased if they are justified. The easiest way to tell if it’s time to raise the rent is to get your property manager to complete a CMA. A CMA or comparative market analysis is an in-depth analysis of the local market which compares like-for-like properties that are available for rent and properties that have been recently rented. It is also a good way for your property manager to justify any increases with a tenant.
Rental increases should generally be done in smaller increments rather than one large amount to avoid shocking the tenants. A reasonable tenant will understand small rental increases but a large increase may force them to move. A happy tenant is always the best type of tenant so raising rents and still keeping them $10 per week below the market is often a good strategy.
The RTA or Residential Tenancies Authority has very strict rules around rent increases. 1. They must be at least 6 months since the tenancy started or the rent changed. 2. Rent cannot be increased during a fixed term agreement unless it is stated in the agreement and even then 2 months’ notice (in writing) must be given. 3. Rent can be increased in a periodic agreement by giving 2 months’ notice (in writing).
Rent increases (and decreases) are simply part of the real estate cycle. As property prices go up, rental prices generally go up too so it is important as an investor to maximize your returns.