Should You Increase the Rent? What Every Landlord Needs to Consider

Landlords everywhere seem to be looking at increasing rents on their investment properties right now. While a rent increase can boost your income, it’s important to weigh up the potential downsides and costs before making any decisions.

Why Do Landlords Increase Rent?

• Boosting Income: Even a modest $25 per week increase can add around $1,300 a year to your bottom line.

• Market Rent Has Risen: Keeping your rent in line with the current market prevents larger, more sudden increases down the track.

• Renovations: If you’ve recently updated the property, it naturally becomes more appealing, which can justify a higher rent.

• Upgraded Amenities: Adding or improving features means you can recoup those expenses through rent.

• Rising Landlord Costs: With interest rates, council rates, and insurance all going up, sometimes rent increases are necessary to cover these rising expenses.

Things to Consider Before Increasing Rent

• Tenant Retention: You might not know how tight your tenant’s budget really is. Even a $10 weekly increase could push them to look elsewhere. A good tenant is worth holding onto.

• Letting Fees: If your rent increase is small, it could take over a year to recover these fees if you lose your current tenant.

• Advertising Costs: Alongside letting fees, advertising costs add up. Combined, these costs could mean it takes up to two years to break even after a rent increase — versus keeping your existing tenant paying the original rent.

• Vacancy Periods: When your property is vacant, you’re earning zero rent. Add this loss to the fees and advertising, and you might be out of pocket by around $2,000 on a $410 weekly rent property. That’s roughly 200 weeks before you break even.

If you’re thinking about increasing rent, it’s best to work closely with your property manager. They often have a good relationship with your tenant and can help explain the reasons for the increase while identifying any issues upfront. Open, honest communication tends to lead to the best outcomes for everyone.