How to carry out effective rent reviews
Regular rent reviews are an important task that landlords can undertake as part of an efficient property management process. As a property manager we undertake periodic systematic reviews on all properties to ensure rents are at optimum market levels. This helps ensure that our landlords have the funds needed to maintain their properties and make improvements.
It is good practice to carry out a rent review approximately every six months, including an analysis to determine the current market value of the property. An increase should only be issued if the rent is deemed below value.
The Residential Tenancies Act (RTA) requires landlords issue 60 days’ written notice to increase the rent, in addition to a period to serve the notice. Rents can not be increased within 180 days of a start date of a tenancy or a previous increase. There is no limit to an increase as long as it is not excessive—Section 24 of the RTA deals with rent increases.
A rent review requires a comparative market analysis which can be undertaken using a variety of sources. A property manager has the benefit of comparing rents on other properties in the neighbourhood and measuring current demand from enquires generated by prospective tenants. Any landlord can research current market rents by monitoring current market listings with local properties, online and in print. It can take weeks to really determine values as different listings in the same suburbs vary depending on size, quality and demand.
The Department of Building and Housing releases market rent statistics which can assist with an analysis. A comprehensive rent review requires comparing a combination of the above sources and the more the better. Section 25 of the RTA deals with market rent.
Rent increases should not be issued to encourage tenants to move out. Rents should sit just on or under market value in order to encourage long term tenancies and reduce vacancies. Charging unnecessarily high rents can result in increased tenant turn over and extended vacancies. As a general rule it is better to increase rents regularly for small amounts then issue large increases less often in order to catch up. Be aware that tenants will expect a landlord who is proactive with rent reviews to also be proactive with maintenance when necessary.
If you have not reviewed your rents recently then it may be time to put a process in place to ensure that it is reviewed regularly.
You can read other recent blogs including Negotiating Tenancies, The Tenant Selection Process, Smoke Alarms in Rental Properties, A Landlord's Preparation for Winter, Reduce Moisture—Reduce Vacancies, Low Maintenance Gardens in Rental Properties and How Many Tenants on an Agreement?
Simon Allen | Allen Realty Ltd
REINZ Residential Property Manager of the Year 2011
March 2011
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