The "Good Tenant" v Rent Increase Dilemma

davo10

fits wrote: »

If the rent is covering costs now (or close to it) that's hardly likely to change in two years is it? All I'm seeing are poor excuses for gouging people tbh. Especially after good will has been built up such as in op's case.

ECB rates are at an all time low, as they rise, interest rates will also rise. Market rate is not gouging, it is market rate. Paying rent on time and looking after the property is not "good will", it is a requirement.

The aim of rental income is not to cover costs and wait for property prices to rise, it is to make a profit. Rents are high now, but property prices in most parts of the country are well short of the prices paid by many during the boom. That is not the tenants fault, but neither can you blame the owners for trying to recoup losses or making a profit.

fits

fits wrote: »

If the rent is covering costs now (or close to it) that's hardly likely to change in two years is it? All I'm seeing are poor excuses for gouging people tbh. Especially after good will has been built up such as in op's case.

It's a business the idea is to make as much profit as possible not provide housing as cheaply as possible.

If costs are being covered as things stand a rent increase means a nice profit can be made now and as I said making a profit is the whole point of running a letting business in the first place.

The_Conductor

fits wrote: »

If the rent is covering costs now (or close to it) that's hardly likely to change in two years is it? All I'm seeing are poor excuses for gouging people tbh. Especially after good will has been built up such as in op's case.

Fits- a hell of a lot can change in 2 years........
We've fast track planning to bring 60k units on stream by 2020 (aka within the life of this government- with a further 26k issued planning and intended for delivery in the following 2 years).
Its entirely plausible that rents could rise another 20% in the next two years- and then collapse by 50% or more practically overnight.
It sounds implausible- however, we've enacted that particular scenario in 2006- and with Brexit and other unknowns on the horizon- God only knows whats going to happen........

A hell of a lot could change in 2 years- we've been there and seen what two years can wreak..........

kandr10

From a renters point of view, we were faced with exactly the same situation, with the figures in question being identical. The landlord wanted an increase of €400. We negotiated at in increase of €225.

I appreciate that landlords are running businesses and not charities, however an increase of €400 seemed astronomical at the time. If he had insisted on it, we would have had to move. We were both satisfied with meeting around the midway point.

fits

davo10 wrote: »

ECB rates are at an all time low, as they rise, interest rates will also rise. Market rate is not gouging, it is market rate

Interest rates in Ireland are already highest in Europe. Any new competition to market will only lower those rates.
This thread puts me in mind of tiger era tourism industry who raised prices so high that people stopped coming.

I am afraid I view raising of rent for an existing good tenant by almost 50% in one go as indefensible, but I can see I'm in the minority here.

davo10

fits wrote: »

Interest rates in Ireland are already highest in Europe. Any new competition to market will only lower those rates.
This thread puts me in mind of tiger era tourism industry who raised prices so high that people stopped coming.

I am afraid I view raising of rent for an existing good tenant by almost 50% in one go as indefensible, but I can see I'm in the minority here.

Variable rates are high, these also depend on ECB rates as rises increase the cost of banks getting money to lend, if ECB rate rises, variable rates will go even higher. A considerable number of mortgages in Ireland are tracker mortgages which are directly linked to the ECB rate.

New vendors/lenders enter a market to make money. If a new lender made it easier to get a mortgage and offered a rate only slightly lower than existing lenders, they would probably do well.

Raising rent to market rate is defensible, what it means is that at the current rent the tenants are benefiting from paying below what others are paying, the confirmation of this is visible by the tenant checking rent for similar properties in the area, the LL cannot raise the rent beyond this rate.

Sound Bite

As a tenant myself, I know we are paying about €200 a month less than market rent. However, 4 yrs in the property and rent always paid on time, no noise complaints and have never called the landlord in all that time. Occasionally see him in the estate where he asks how are things or he may put a note in the door if there's any alarm checks or maintenance works going on etc.

I think we are worth a discount as we cause zero hassle. If he asked for €100 of an increase we would probably pay it but not €200. His choice, his risk but good tenants are worth something.

davo10

Sound Bite wrote: »

As a tenant myself, I know we are paying about €200 a month less than market rent. However, 4 yrs in the property and rent always paid on time, no noise complaints and have never called the landlord in all that time. Occasionally see him in the estate where he asks how are things or he may put a note in the door if there's any alarm checks or maintenance works going on etc.

I think we are worth a discount as we cause zero hassle. If he asked for €100 of an increase we would probably pay it but not €200. His choice, his risk but good tenants are worth something.

Is what you describe above not what all tenants are supposed to do? You don't deserve a bonus for paying your rent on time and looking after the property.

kandr10

davo10 wrote: »

Is what you describe above not what all tenants are supposed to do? You don't get a bonus for paying your rent and looking after the property.

There are degrees to which you can look after a property: extremely well, very well, good. Yes, tenants should be rewarded if they fall into the extremely well category.
I never wanted to be an annoying tenant so always looked after as many things as possible without bothering the landlord, thinking it would earn some grace come rent increase time. That grace was never given and there was never any thanks for the things we did, only complaints about what wasn't up to scratch, so it left me with no incentive to go above and beyond and the landlord got calls when things needed fixing. I still looked after the place but only 'well', not 'extremely well' as I had previously.

fits

We just painted two rooms in our rented property that needed freshening up, after clearing it with landlords. We didnt charge the landlords for paint or materials. We also organised some tree felling for them last year (they arent living in Ireland). We have a good relationship with them, with concessions going both ways. Id feel less well disposed towards them if they put up the rent by 50% just because they could.

Sound Bite

davo10 wrote: »

Is what you describe above not what all tenants are supposed to do? You don't deserve a bonus for paying your rent on time and looking after the property.

I agree it's exactly what all tenants are supposed to do - nothing more, nothing less. I don't deserve a bonus for paying my rent on time or looking after the property. Nor do I think I'm entitled to one. Absolutely not.

All that said, I do know that tenants like me are in short supply. It's up to my landlord whether he decides to acknowledge that or not. Simple as that.

The fact that the good tenant/rent increase debate comes up so often means a tenant like me must have some value to a landlord. In an ideal world, all tenants would be like this but the reality is they aren't.

It's a mutually beneficial relationship. Landlord is completely free to make whatever choice they want.

kandr10

kandr10 wrote: »

There are degrees to which you can look after a property: extremely well, very well, good. Yes, tenants should be rewarded if they fall into the extremely well category.
I never wanted to be an annoying tenant so always looked after as many things as possible without bothering the landlord, thinking it would earn some grace come rent increase time. That grace was never given and there was never any thanks for the things we did, only complaints about what wasn't up to scratch, so it left me with no incentive to go above and beyond and the landlord got calls when things needed fixing. I still looked after the place but only 'well', not 'extremely well' as I had previously.

Why are you paying to do things that are the LLs responsibility? I don't get this from either side.

It's a LLs business to make as much profit as possible and it's also his job as a LL to fix things in the house etc. I woundn't dream of paying to fix something myself in a rental property, it's the LL job to do this (and he can deduct this from his tax bill also). We don't even weed the garden as the LL has taken responsibility for it.

On the other hand I wound not charge below market rent for good tenants nor would I expect them to fix things themselves, in fact I'd prefer to fix the things as I could ensure problems are fixed correctly and it can be offset against tax anyway.

fits wrote: »

We just painted two rooms in our rented property that needed freshening up, after clearing it with landlords. We didnt charge the landlords for paint or materials. We also organised some tree felling for them last year (they arent living in Ireland). We have a good relationship with them, with concessions going both ways. Id feel less well disposed towards them if they put up the rent by 50% just because they could.

Just because you are taking it on yourself to invest money in the LL property shouldn't exempt you from paying market rate you didn't save the LL anything anyway as the painting and materials would have been tax deductible for him and would have reduced his tax bill.

There are foolish people on both sides of this, LLs charging well below market rent and tenants spending their own money on things that are the LLs responsibility.

This whole "good" tenant thing is growing very tiresome also. The vast majority of tenants are good tenants who pay their rent on time and don't cause trouble. Ringing the LL when something needs fixing does not mean they aren't a good tenant.

kandr10

Emmet Ugly Rice wrote: »

Why are you paying to do things that are the LLs responsibility? I don't get this from either side.

It's a LLs business to make as much profit as possible and it's also his job as a LL to fix things in the house etc. I woundn't dream of paying to fix something myself in a rental property, it's the LL job to do this (and he can deduct this from his tax bill also). We don't even weed the garden as the LL has taken responsibility for it.

On the other hand I wound not charge below market rent for good tenants nor would I expect them to fix things themselves, in fact I'd prefer to fix the things as I could ensure problems are fixed correctly and it can be offset against tax anyway.



Just because you are taking it on yourself to invest money in the LL property shouldn't exempt you from paying market rate you didn't save the LL anything anyway as the painting and materials would have been tax deductible for him and would have reduced his tax bill.

There are foolish people on both sides of this, LLs charging well below market rent and tenants spending their own money on things that are the LLs responsibility.

This whole "good" tenant thing is growing very tiresome also. The vast majority of tenants are good tenants who pay their rent on time and don't cause trouble. Ringing the LL when something needs fixing does not mean they aren't a good tenant.

We're talking things like a light switch breaking, handles coming loose on doors, small things that needed repairing/replacing. I by no means invested money in the place but equally didn't want to go ringing the landlord for every little thing as I felt it would make me seem irksome and he'd be less likely to keep us on as tenants. Don't get me wrong, when the washing machine sat down I was straight on to him to have it dealt with.

kandr10

kandr10 wrote: »

We're talking things like a light switch breaking, handles coming loose on doors, small things that needed repairing/replacing. I by no means invested money in the place but equally didn't want to go ringing the landlord for every little thing as I felt it would make me seem irksome and he'd be less likely to keep us on as tenants. Don't get me wrong, when the washing machine sat down I was straight on to him to have it dealt with.

I don't think any tenant would ring a LL up over a lose handle or that sort of thing, so I woundn't say you are in anyway out of the ordinary there. Something like a light switch I don't think a tenant should be fixing themselves.

andekwarhola

We charge below market rate because of the convenience of having an ideal tenant when we live in different city to the property.

It's not 'charity', rather mutual benefit really.

fits

Emmet Ugly Rice wrote: »

Just because you are taking it on yourself to invest money in the LL property shouldn't exempt you from paying market rate you didn't save the LL anything anyway as the painting and materials would have been tax deductible for him and would have reduced his tax bill.

Why do you presume the landlord is a he? Its the default I suppose.

Our landlords live in a different country. We werent trying to save them money, just not so bothered about charging for a couple of tins of white paint.

Elliott S

Put it up to, say, €1300 or €1350 per month. It's a more manageable increase for your tenants than the full amount and you're not missing out on that much once you take taxation into account. Missing out on the net amount of €900-€1200 per annum would be worth it to keep good tenants.

Elliott S

Emmet Ugly Rice wrote: »

Just because you are taking it on yourself to invest money in the LL property shouldn't exempt you from paying market rate you didn't save the LL anything anyway as the painting and materials would have been tax deductible for him and would have reduced his tax bill.

They did save him something because you take the amount spent off the pre-taxation income, not the tax bill. He would save about 50% of the amount he spent.

Sad Professor

Charging below market rate is not charity. Charity would be letting them live in the house for free. A good, long-term tenant saves the landlord money, which the landlord has the option of passing onto the tenant. Yes being a landlord is a business and the landlord expects a return on their investment, but not all returns are immediate, nor should landlords expect them to be.

However, the unstable nature of our rental market makes long-term investment difficult. Given the kind of volatility we've seen in recent decades, a landlord has little motivation to reward good tenants when the market could crash tomorrow. This is why I think rent regulation and other stabilising measures would be beneficial to landlords and help them plan their investments over a longer period of time. The bubble-like rent increases we're seeing at the moment are not sustainable. There is blatant gouging of tenants going on, especially students. But there are many good landlords (like the OP and others in this thread) who are happy to charge below market rents for good tenants and I applaud them for it.

Anyway, to answer the OP's question, I think you should focus on making the rent increase manageable. Say not more than 20-30 percent of the current rent. The worst thing about the current 2 year rent review is that tenants face potentially devastating rent increases after 2 years. It's very hard to plan anything when you know your landlord could slap a huge increase on you with 3 months notice.

April 73

Thanks for the replies everyone. I've read with interest.

If the new rental laws had not come in I would have raised the rent by €100 in Jan 2016 to €1150 and would probably have looked at another €100 in Jan 2017 to €1250. Now that I am going to be stuck with the rent for another two years I may add a bit extra.
Although technically I could raise it to the going rate I'm not going to for a combination of reasons. I feel a €450 a month increase is a huge jump and that will have a big impact on the tenants while I will see less than half of that increase.
So the tenants would have €450 a month less to spend, I have about €220 extra & the taxman gains about €230. That just doesn't sit well with me.

Right now I'm thinking €1300. The difference would get me to around break-even point, cover costs & about half of the yearly tax bill. This property was always a long-term investment & a way to generate income when we retire. It is a business I suppose but raising to market rates is just not sitting comfortably with me.

Many people would see that as foolish while others would criticise me raising it at all. Hard to keep everyone happy & this is maybe a compromise that I can live with.

yqtwqxqm

You should charge the market rate. You wont be able to put it up for another two years.
Maybe tell the tenant that you will give them back say €500 after a year if they are still there and have not missed any rent due and also depending on how much you have to spend on repairs and maintenance.
By charging below market rate, you are effectively just lighting cigarettes with the cash you are losing.

If you charge them full rate and then give them back some money its win/win and you are not lowering the market rate. Also you are giving them an incentive to continue being the model tenants they are already.

fits

yqtwqxqm wrote: »

By charging below market rate, you are effectively just lighting cigarettes with the cash you are losing.

.

Maybe thats what the olympic council thought :pac: Just because you can charge a certain amount, doesnt mean you should.

OP, I think 1300 is probably fair enough.

yqtwqxqm

davo10 wrote: »

Variable rates are high, these also depend on ECB rates as rises increase the cost of banks getting money to lend, if ECB rate rises, variable rates will go even higher. A considerable number of mortgages in Ireland are tracker mortgages which are directly linked to the ECB rate.

New vendors/lenders enter a market to make money. If a new lender made it easier to get a mortgage and offered a rate only slightly lower than existing lenders, they would probably do well.

Raising rent to market rate is defensible, what it means is that at the current rent the tenants are benefiting from paying below what others are paying, the confirmation of this is visible by the tenant checking rent for similar properties in the area, the LL cannot raise the rent beyond this rate.

The part I bolded is often misundertood.
Of course a LL can raise rents beyond that rate. If they couldnt, then rents would never rise. Someone always has to break the ceiling first, the rest follow, until another breaks the ceiling and son. If you look around at similar properties you can make a decision that the market is rising and price your own place at what you think the new rate is going to be. As long as you arent taking it to extremes you can raise it higher.

yqtwqxqm

kandr10 wrote: »

We're talking things like a light switch breaking, handles coming loose on doors, small things that needed repairing/replacing. I by no means invested money in the place but equally didn't want to go ringing the landlord for every little thing as I felt it would make me seem irksome and he'd be less likely to keep us on as tenants. Don't get me wrong, when the washing machine sat down I was straight on to him to have it dealt with.

Are those jobs worth €200 per month to your landlord.
Sorry, i mean worth €90 a month to your landlord and worth €110 a month to Mr Noonan.

davo10

yqtwqxqm wrote: »

The part I bolded is often misundertood.
Of course a LL can raise rents beyond that rate. If they couldnt, then rents would never rise. Someone always has to break the ceiling first, the rest follow, until another breaks the ceiling and son. If you look around at similar properties you can make a decision that the market is rising and price your own place at what you think the new rate is going to be. As long as you arent taking it to extremes you can raise it higher.

I think you need to understand and you need to read the new rules regarding rental rises to existing tenants. The LL cannot raise above current rate and must in fact show three examples of rentals at the rate he/she wants to raise it to.

Higher rent rates are set by new lets where LL can ask what they want, rental increases to sitting tenants then follow.

yqtwqxqm

davo10 wrote: »

I think you need to understand, higher rent rates are set by new lets where LL can ask what they want, rental increases to sitting tenants then follow.

Not at all.
The market rate is the market rate. It doesnt matter if its an increase or a new let.

davo10

yqtwqxqm wrote: »

Not at all.
The market rate is the market rate. It doesnt matter if its an increase or a new let.

That is not what you said in your post, the LL cannot raise rent above existing market rates. If the rate depended solely on existing lets, it would never rise as legislation prevents it. The higher rates are set by new lets, existing rents can then be increased to match them.

4ensic15

yqtwqxqm wrote: »

The part I bolded is often misundertood.
Of course a LL can raise rents beyond that rate. If they couldnt, then rents would never rise. Someone always has to break the ceiling first, the rest follow, until another breaks the ceiling and son. If you look around at similar properties you can make a decision that the market is rising and price your own place at what you think the new rate is going to be. As long as you arent taking it to extremes you can raise it higher.

That is wrong. Rents can't be reviewed beyond the going rate. Rents rise when vacant units are advertised and the new tenant pays whatever rent he can negotiate. The LL can ask any rent he likes for a vacant unit. If there is demand someone may pay it, if not he has to discount down until he achieves a letting. That is how it works.

Gmaximum

OP your logic is sound. If you've made up your mind go for it at €1300. If they move on you can up it for the new tenant. If they stay you can expect very few headaches. All in all a good deal for everyone

Baby01032012

The focus of everyone's dismay at the current crisis is always going to be at the small time direct landlord as they are the human face of the landlord.
What everyone forgets is that a lack of strategy or a housing plan has left the small landlord to largely support social housing where councils and governments have failed to provide.
There is also the larger players like the large investment funds and REITS who own large blocks of apartments. They will never even consider the argument for charging a reduced rent for a good tenant. They have their investors to consider. They have the buying power, the volume of units, economies of scale, capital gains and income sheltered from tax within the investment structure.
Then there's every single person who has a managed pension fund in this country. Property is an asset class in majority of pension funds, either holding property directly or indirectly. That property is managed as a business for the shareholder ie you. So there is very few degrees of separation between most people in this country and being a landlord, be it direct, investment fund or a pension.
Yet it is the small single unit landlord who either made a decision to invest in property or a reluctant landlord who had no choice due to work etc., negative equity couldn't trade down but got stuck as a landlord. Who gets a rental income, but pays mortgage, property tax, can only offset 3/4 of interest paid to finance that property against tax on that property., who is subject to tax, prsi,usc at the highest rate. Who has very little rights over his own property once let. In the limited cases where he may be allowed to terminate he must make a statement in front of a solicitor. He can not evict for tenants over holding not paying rent or destroying the property. He must go through an overworked and underfunded RTB and then if successful the courts while loading income while at same time obeying the law himself and paying the mortgage on the property.

The OP came looking for some genuine advice and some people turned the thread into a politicalised landlord bashing.