It’s important to increase your rent regularly in order to be achieving the highest possible return on your investment. Increasing rents is a tricky business depending on the relationship you have established with your tenant. It’s great to have a personal rapport with your tenant, but depending on how personal the relationship is, things can get difficult when it comes to increasing the rent for the property.
Increasing the rent comes down to the market and what it is doing. For example, the market may be flat for a period of time in which case you would not increase the rent on a good long term tenant. If the market changes and demand increase or decreases in a given location, then of course rental returns get affected and subsequently existing tenants rent will either increase or simply stagnate.
If your market rent for the property is stagnating, there are other ways to increase the rent value and income. Doing some improvements like installing a heat pump or perhaps closing in a garage is just one way.
The easiest way to manage rental increases is to review them at the end of their fixed term tenancy or have a set date that you review it, whether it be annually or bi-annually. It’s important to understand that you can not increase your tenant’s rent too much or too often. A good guide to what you can and cannot do is the Department of Building and Housing website www.dbh.govt.nz
Benefit of a property manager
The great thing with a property manager of course is that they increase rents systematically and with few personal relationship issues. The nature of their work does not allow them to interact on a personal level “too much” as it simply makes their job too difficult to do. In addition to this and for the most part, property managers are paid a commission of the rent collected. The higher the rent, the higher their return, they are incentivised to increase rents regularly!