How to maintain a tenant and improve your rental return
We all want a great tenant and the rent on our investment property to go through the roof. Both can be hard to find and in terms of rent, even harder to keep increasing.
For example, you might get the great tenant but then be reluctant to notch up the rent in order to keep the tenant happy. Or you might be achieving a good rental rate but feel obliged to continue the same rent year after year. After all, some rent is better than none at all, right?
Let's start with the tenant. Property millionaire and author Jan Somers says keeping a good tenant is all about being fair and the odd improvement every now and then isn't a bad idea.
"It doesn't have to be a complete renovation," she says. "But if something needs fixing, we do it instantly."
In today's current market, she adds some areas such as Redcliffe in Queensland are experiencing an oversupply of rental properties. This might mean landlords actually have to drop their rent, but lowering your rent slightly is often worth it in a slow market.
"A tenant tomorrow is better than holding out to get your $350 per week in three months' time," she says.
"You must have a tenant ASAP, so 90 per cent or 80 per cent of what you think your rent should be is better than 100 per cent of nothing."
If the rent is slightly cheaper, the tenant may also be willing to stay longer.
"Then you don't have the changeover fee where you'd be paying an agent once or twice a year," she points out.
While Somers is generous with her tenants, it's still important to "nudge the rent along" occasionally.
"If the market warranted putting it up $20 or $30 per year, we might put it up at $5 or $10," she says.
Giving the occasional bottle of champagne to your property manager doesn't hurt either.
However, Your Empire founder and director, Chris Gray, is a little bit stricter with his portfolio. Being a savvy Sydney investor, he has no trouble ending a lease if it means more for the hip pocket.
"A lot of tenants won't pay a massive increase, so you're better off getting rid of them," he says.
"People say 'I've got good tenants so I'm not putting the rent up'. But if you have a good property, there should always be good tenants."
The trick, he believes, is to get a good property manager who knows how to negotiate increasing the rent and how to market your property so it's the must-have roof to be under. You can also do renovations but make sure the tenant is paying for them.
"Get the property manager to ask the tenant what they want and then what they'd be prepared to pay for it," he says.
"Add in lost rent down time. With a lot of these things, quite often it's (the renovation) is over a period of weeks. But over the year, the net benefit might then be positive."