Should you increase the rent for your tenants in 2023?

Perth experienced excellent rental value growth in 2022 of around 9.1 per cent. This was thanks to vacancy rates sitting at record lows.

If you are a landlord/investor and you have had tenants in your property for some time, you may be wondering if it’s possible to increase the rent you charge your tenants in 2023. A few factors will influence your decision and there are some things to keep in mind before you go ahead with a rent increase.

Answer the following questions then contact your property manager for some more specific information:

Has your tenants’ rental agreement expired?

In Western Australia, rent can only be increased during the fixed term of a rental agreement if the fine print stipulates the amount of the increase or the method of calculating the increase.

It won’t be possible to increase the rent if your tenants are still under an agreement with you and there is no clause about changing the price they pay. However, once the contract has expired, you will be able to review and increase the rent.

Speak to your property manager about the status of your rental agreement/s so you can start planning a change.

When did you last raise the rent?

As shared by commercewa.com.au, “Where a tenancy is periodic (no predetermined finish date) rent increases can occur at six-monthly intervals (but no sooner).”

If your tenants started paying more rent less than six months ago, you will have to wait before you can make another adjustment.

Have you given the tenant notice in writing?

Collaborate with your property manager to share a Notice to Tenant of Rent Increase (Form 10) and give your tenant 60 days’ notice about the change. The form should include details of the amount of the increase and the day it will take effect.

Is the increase ‘reasonable’?

Your tenant may have grounds to claim the rent increase is unreasonable if the change is drastic. Work with your property manager to define what is reasonable before you try to raise the rent.

How much are other investors charging for properties in your area?

Knowing current market conditions will help you decide how much you can raise the rent by. Again, your property manager is the best source of information. They can tell you what homes of a similar size and condition are leasing for in the streets around your investment property.

What kind of relationship do you have with your tenants?

Sometimes a bird in the hand is better than two in the bush. If your tenants have been reliable and have cared for the property like it is their own, don’t raise the rent in a way that could result in them moving out.

When you raise the rent, you do risk losing your tenant. As a result, you will need to cover the cost of finding new ones, which may offset any financial gains.

If a change is unavoidable, it all comes down to communication and reasonable increases, which your property manager can help with.

On the other hand, if you don’t feel your tenants are holding up their side of the ‘bargain’, raising the rent can be a strategy to encourage them to move on. As mentioned above, tread carefully so you don’t get pushback and claims of unreasonable behaviour.

At the end of the day, your investment property is a strategy to grow your wealth. If it has been a while since you last increased the rent and your mortgage has increased due to higher interest rates, a rent increase may be the right move for you.

It is not always an easy decision to make so contact D Residential for personalised advice today.