High tenant turnover can result in more $$$

Sometimes a long term tenant that has steady rent increases over years is not the best option.
Rent increases while a tenant is living in the property are usually based on a comparative market analysis of similar properties otherwise they could be challenged at a tribunal by the tenant and the price increase overruled.

When tenants leave however, rents can be tested at the higher end of the market or pushed beyond that depending on how much time is available. Ie if a tenant has communicated that they will be leaving 2 months prior, that is plenty of time to market the property and push for a higher rent with new tenants.

Overall, because the increases are steeper, a turnover of tenants can sometimes result in much higher rents achieved for the property and therefore a new precedence set for that type of property.
Agree or not?

Keep in mind that although there is a high turnover of tenants, ie once a year, the vacancy periods should still be close to ZERO if marketed effectively and early enough.
 
Agree or not?

Keep in mind that although there is a high turnover of tenants, ie once a year, the vacancy periods should still be close to ZERO if marketed effectively and early enough.

Yeah I don't really agree with this.

Even in the event that vacancy periods are close to zero, things like 2 week's letting fee and final/initial inspection reports and costs would more than swallow any increase in rents.
 
Yeah I don't really agree with this.

Even in the event that vacancy periods are close to zero, things like 2 week's letting fee and final/initial inspection reports and costs would more than swallow any increase in rents.

Yes true

So don't see any benefit to bigger spikes of rent increases between tenants?

What about for the longer term?
properties that have had the same tenant for 10 years are usually under rented, even if they have had regular smaller increases.

Properties usually get an exit clean between tenants too so it sets a new precedence for how they need to be maintained. Do you see a benefit in that?
 
Yeah I don't really agree with this.

Even in the event that vacancy periods are close to zero, things like 2 week's letting fee and final/initial inspection reports and costs would more than swallow any increase in rents.

I agree with you.

Of course long term say 10 year tenants with way below market rent is a bad idea but changing tenants very often to get max rent will usually result in the PM doing the best out of the whole exercise.
 
I disagree too. I'd rather a long term tenant who is periodically reviewed for rent increases than a vacancy, letting fees, incoming/outgoing report fees, this fee, that fee, fark the owner fee, and the hassle of no income.
 
Sometimes a long term tenant that has steady rent increases over years is not the best option.
Rent increases while a tenant is living in the property are usually based on a comparative market analysis of similar properties otherwise they could be challenged at a tribunal by the tenant and the price increase overruled.

Rent increases as you said, can only be increased in line with the market - otherwise it can be challenged by the tribunal.

But if it is vacant why would you think that you can (regularly) get more than market rent (which is what you seem to be suggesting, not just a one off desperate tenant)? And if you can get this higher rent regularly, wouldn't that be the market rent?

Seems like a circular arguement to me?

also

agent fees are tax deductible.
vacancies are not
low rent is not.

While agency fees are deductible as they are a cost of the investment, the other two (vacancies & low rent) are a reduction in income. Surely they have a similar impact on total tax paid? Having said that I was never particularly good at maths, so please feel free to show me where I have made a mistake (I am a simple landscaper by trade).
 
Personally I'd rather keep a tenant for a long time.
This prevents any additional cost from letting fees, gaps between tenancies, outgoing reports, etc.

If the property is managed well, then it can be kept in line with market activity. Only a poor agent would let it lag behind.
 
High tenant turnover can result in more $$$




of course it's true.
The agency makes more money, every time a new tenant is cycled thru.
 
fark the owner fee.

Ha ha - how do I charge that one?

Seriously though, the general answers so far are telling me that it's bad because the agent is making money. Understood.

If the spike in rent offset what the agent is making - win/win, would there be a benefit then?

Say there was a $20 increase per week = $1040 for the year. If the letting fees were around $1000 would it be worth doing?
say normal rent is $480 and this property is achieving $500 per week due to sourcing new tenants.
(forget GST for now as it complicates things and I'm just setting an example).
 
I guess the other perspective is that most landlords don't want the headaches of new tenants every 12 months. If they were that hands on, they'd probably be self managing.

I would definately agree that if the rent is significantly below the market rent when you buy a property, often it is easier to get it back up to market rent with a fresh set of tenants (rather than trying to hit them with a 20% increase).
 
I'll take long term tentant with market rent thanks. Good PM should be increasing inline with the market. Understand some small discounting when you have a good tenant, but I like to ensure increase each year to 'condition' the tenants.

Still struggling to see how paying agent fees for new tenant would be benefitical over long standing tenant on slightly under market rent. To me the longer the tenant is there the better, and from a tenant perspective I would assume the longer they're there the less likely they would want to move.
 
Say there was a $20 increase per week = $1040 for the year. If the letting fees were around $1000 would it be worth doing?
say normal rent is $480 and this property is achieving $500 per week due to sourcing new tenants.
(forget GST for now as it complicates things and I'm just setting an example).

I'll take the same tenants for $500p/w thanks.

I believe everyone understands what you're trying to get at. But most would want and expect the PM who is being paid by the landlord to achieve the best result, market rent.
 
Better the devil... uh, tenant, you know. If I had a reliable tenant in my property there's no way I'd be giving them to boot to make way for a *possible* higher paying tenant.

Increase rent in line with the market and if they don't like it then they can move out but I wouldn't be evicting a tenant to take a punt.
 
Ha ha - how do I charge that one?

Seriously though, the general answers so far are telling me that it's bad because the agent is making money. Understood.

If the spike in rent offset what the agent is making - win/win, would there be a benefit then?

Say there was a $20 increase per week = $1040 for the year. If the letting fees were around $1000 would it be worth doing?
say normal rent is $480 and this property is achieving $500 per week due to sourcing new tenants.
(forget GST for now as it complicates things and I'm just setting an example).

Unfortunately you also fail to recognise the opposite in the market.

Currently I have 2 identical IPs. One has a tenant leaving, one is rented by a long term tenant. Long term tenant is paying $480. The market however has slowed and for the vacant place it will be vacant forever if I hold out for $480. So it is being advertised at $450 which is the current market value.

So I get incoming, outgoing, letting, random fee, new car for Agency Licensee fee etc and a reduction in rent. I would MUCH rather a long term tenant.

Is the tenant leaving because they can rent somewhere cheaper? nope. They are leaving because they have bought their own place.
 
If the spike in rent offset what the agent is making - win/win, would there be a benefit then?

Say there was a $20 increase per week = $1040 for the year. If the letting fees were around $1000 would it be worth doing?
say normal rent is $480 and this property is achieving $500 per week due to sourcing new tenants.

I'm not sure where this win/win comes from? Property managers shouldn't be encouraging high turnover in tenants so they can get higher fees. Surely the landlord would much rather just increase the rent to $490 and keep the extra $520pa, without the PM benefiting.

As for an extra $1040pa, with $1000 letting fees. I'd personally rather just keep the old tenants? Less headaches, for the cost of $40 - seems fair to me.
 
Better the devil... uh, tenant, you know. If I had a reliable tenant in my property there's no way I'd be giving them to boot to make way for a *possible* higher paying tenant.

Increase rent in line with the market and if they don't like it then they can move out but I wouldn't be evicting a tenant to take a punt.

Yes I agree Kinnon, I'm not suggesting not renewing leases for good tenants to actively generate a higher turnover.

Just a theoretical argument on how a higher turnover CAN be beneficial and a keen interest in the SS demographic way of thinking around this subject.

thanks for your comments so far.
 
Ha ha - how do I charge that one?

Seriously though, the general answers so far are telling me that it's bad because the agent is making money. Understood.

If the spike in rent offset what the agent is making - win/win, would there be a benefit then?

Say there was a $20 increase per week = $1040 for the year. If the letting fees were around $1000 would it be worth doing?
say normal rent is $480 and this property is achieving $500 per week due to sourcing new tenants.
(forget GST for now as it complicates things and I'm just setting an example).


I don't care if an agent is making money, in fact I recognize the importance of it. I'm more concerned with how much I'm making and to me making $40 a year extra as per your example and then having the risk of the unknown with a new tenant seems to be a complete waste of time and potential for it to backfire is too great. What if it takes an extra week to lease out than budgeted? What if the new tenant is a lemon?
 
Back
Top