A recent study from CoreLogic shows that Sydney is set to be dethroned as the most expensive city in Australia to rent a house. So, if you are a landlord in the city planning to raise rent before the market value goes down even more, keep in mind that this move can either increase your income or push tenants away.
The first thing to do is to assess the market. Rental prices are determined by the law of supply and demand. The more people there are willing to rent a property and the less rental properties there are available, the easier it is for landlords to raise their values.
But what if this move displeases tenants? One of the recommended ways for landlords to gauge whether they can increase the rent without losing their tenants is to compare their asking price with the rent of similar properties in the local area. If others are charging more, there is a high chance that they will be able to increase rent.
The more important piece of the puzzle, though, is knowing when to raise the rent. In most states, including New South Wales (NSW), landlords are only allowed to increase the rent after the fixed term period of the agreement has ended.
Planning your rental price hike
Landlords are not permitted to increase the rent in NSW during a fixed-term agreement of less than two years, unless a term outlining the future increase has been included in the original tenancy agreement.
The term must specify the exact dollar amount of the increase, or explain exactly how an increase will be calculated. For instance, a percentage must be provided.
Within the fixed-term agreement of more than two years, the rent can be raised at any time, provided the required notice is distributed. However, landlords may not increase the rent more than once every 12 months.
If there is no written agreement, landlords cannot increase the rent during the first six months of the tenancy.
It is also essential to indicate in the letters to tenants the amount of the rent increase and the date the increase will come into effect.
