The "Good Tenant" v Rent Increase Dilemma

CruelCoin

April 73 wrote: »

it seems like a huge jump from the current rent to the going market rate & while I would like to increase the level, I don't want to screw the tenants I have. They pay on time, look after the place and are pretty self-sufficent.

How do landlords strike a reasonable balance?

Good tenants are valuable, but i'd argue that the proportion of crappy tenants decreases as the rent becomes more expensive, make of that what you will.

Not being ****birds with your property is the minimum to be expected and losing out on 10k for the rest of the part 4 period is too much.

As others have said, it's a business, not a charity.

mel123

I havnt read every single post, but if the OP is 'losing' out 10k, in reality how much of this 10k is real money they are going to see in their pocket?
Genuine question, i'm crap at taxes :-)

murphaph

mel123 wrote: »

I havnt read every single post, but if the OP is 'losing' out 10k, in reality how much of this 10k is real money they are going to see in their pocket?
Genuine question, i'm crap at taxes :-)

Assuming with the OP's income they are top rate tax then about half of it. It's a luxury holiday every year the OP loses by charging under market rates.

Speedwell

If the landlord can make a survey of rental properties in the area, take the ten highest rental rates for similar properties, and request the average minus ten percent, what's to prevent me from gathering the same information, taking the ten lowest rental rates for similar properties, adding ten percent to the average, and counteroffering with that figure? I have commercial real estate experience, so I would be far from reluctant to do such a survey.

Of course, this presumes there are more than twenty similar properties available for rent at different price points in my particular area. I feel quite sure there aren't. But I don't live in Dublin, thank goodness; paying 450 EUR per month on top of my existing rent would fall short of even a discounted market rent in Dublin.

Gael23

From €1050 to €1400 is a massive increase,~ 33% in one go. If that was imposed on me as a tenant I would leave a property. You say you have a good tenant that you clearly trust and that respects your property. That should be valuable to any landlord so why risk losing them?

murphaph

Gael23 wrote: »

From €1050 to €1400 is a massive increase,~ 33% in one go. If that was imposed on me as a tenant I would leave a property. You say you have a good tenant that you clearly trust and that respects your property. That should be valuable to any landlord so why risk losing them?

But where to? There's an acute shortage of rentals in Dublin.

Elliott S

Speedwell wrote: »

If the landlord can make a survey of rental properties in the area, take the ten highest rental rates for similar properties, and request the average minus ten percent, what's to prevent me from gathering the same information, taking the ten lowest rental rates for similar properties, adding ten percent to the average, and counteroffering with that figure? I have commercial real estate experience, so I would be far from reluctant to do such a survey.

Of course, this presumes there are more than twenty similar properties available for rent at different price points in my particular area. I feel quite sure there aren't. But I don't live in Dublin, thank goodness; paying 450 EUR per month on top of my existing rent would fall short of even a discounted market rent in Dublin.

Exactly! The properties at that €1500 mark need to be comparable to the OP's for her property to be worth the same. In any market, there are always different price points depending on the quality of the accommodation for rent.

Gael23

Gael23 wrote: »

If that was imposed on me as a tenant I would leave a property. You say you have a good tenant that you clearly trust and that respects your property. That should be valuable to any landlord so why risk losing them?

Sure there will be a queue at the door of people to move in, probably won't even lose a days rent and can up it to the full 1500 without difficulty for the new tenants (also if you move you have to find somewhere which will be hard and then it may be just as expensive anyway). If the LL does their homework the chances of getting bad tenant are very slim particularly at that price point.

The risk is very small and the gains considerable. As a gambling man if I was betting on a tenant being good and the reward was 5k a year I'd be lumping on it in the bookies.

I'm amazed how easily people appear to be willing to forgo making a nice bit more money from a business they run with the aim of making money, unless of course they feel they are running some sort of subsidised housing scheme? In a few years time if rents drop again every tenant will be hopping for a reduction. LLs need to make hay while the sun is shining.

Tar.Aldarion

You can do all the checks you want but when you see supposedly good-on-paper tenants do thousands in damage/start refusing to pay rent and a lengthy process to being dealing with it landlords are often happy to have a good tenant and take a bit less. That's up to them. They can also increase it in two goes to market rent instead of one 33% jump, this keeps the tenants happy.

yqtwqxqm

4ensic15 wrote: »

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.

Please link to an official document that seperates vacant units from let units regarding increases?

yqtwqxqm

davo10 wrote: »

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.

I know what I said and so do you.
Again. Linky where sitting tenants are separated from new tenants for rent purposes please?

yqtwqxqm

Emmet Ugly Rice wrote: »

Sure there will be a queue at the door of people to move in, probably won't even lose a days rent and can up it to the full 1500 without difficulty for the new tenants (also if you move you have to find somewhere which will be hard and then it may be just as expensive anyway). If the LL does their homework the chances of getting bad tenant are very slim particularly at that price point.

The risk is very small and the gains considerable. As a gambling man if I was betting on a tenant being good and the reward was 5k a year I'd be lumping on it in the bookies.

I'm amazed how easily people appear to be willing to forgo making a nice bit more money from a business they run with the aim of making money, unless of course they feel they are running some sort of subsidised housing scheme? In a few years time if rents drop again every tenant will be hopping for a reduction. LLs need to make hay while the sun is shining.

I saw on a TV show once where someone was selling a car and his wife thought he was asking too much when she heard the market price and what he was selling for.
The presenter got a steel bucket and handed the wife tickets for a €500 holiday, the difference between what his wife thought was fair and the market price, and then told her to put the tickets in the bucket. When she did he set fire to it.
All of a sudden it dawned on the wife what she was asking.
Pretty sure the tickets were fake, but it was a good lesson nonetheless.

davo10

yqtwqxqm wrote: »

I know what I said and so do you.
Again. Linky where sitting tenants are separated from new tenants for rent purposes please?

http://www.irishstatutebook.ie/eli/2004/act/27/enacted/en/html

http://www.citizensinformation.ie/en/housing/renting_a_home/rent_increases.html.

Www.daft.ie.

Landlords can charge whatever they like for new lets, but LL can only raise rents to market levels. New lets therefore set the bar.

Grolschevik

davo10 wrote: »

http://www.irishstatutebook.ie/eli/2004/act/27/enacted/en/html

Specifically section 24:
http://www.irishstatutebook.ie/eli/2004/act/27/section/24/enacted/en/html#sec24

yqtwqxqm

davo10 wrote: »

http://www.irishstatutebook.ie/eli/2004/act/27/enacted/en/html

http://www.citizensinformation.ie/en/housing/renting_a_home/rent_increases.html.

Www.daft.ie.

Landlords can charge whatever they like for new lets, but LL can only raise rents to market levels. New lets therefore set the bar.

Looks like ive been doing it wrong so.

davo10

Speedwell wrote: »

If the landlord can make a survey of rental properties in the area, take the ten highest rental rates for similar properties, and request the average minus ten percent, what's to prevent me from gathering the same information, taking the ten lowest rental rates for similar properties, adding ten percent to the average, and counteroffering with that figure? I have commercial real estate experience, so I would be far from reluctant to do such a survey.

Of course, this presumes there are more than twenty similar properties available for rent at different price points in my particular area. I feel quite sure there aren't. But I don't live in Dublin, thank goodness; paying 450 EUR per month on top of my existing rent would fall short of even a discounted market rent in Dublin.

There is nothing whatsoever to prevent you from doing that, in fact for a commercial premices where there seems to be an abundance of empty units on every Main Street, it would be remiss of you not to.

But residential tenancies are different with different laws. The demand/supply issue means that if you offer lower then the market rate you are far more likely to be told to PFO than for a commercial let. Landlords are restricted from raising rents above market rate but are in no way obliged to accept lower than it.

EagererBeaver

Tar.Aldarion wrote: »

You can do all the checks you want but when you see supposedly good-on-paper tenants do thousands in damage/start refusing to pay rent and a lengthy process to being dealing with it landlords are often happy to have a good tenant and take a bit less. That's up to them. They can also increase it in two goes to market rent instead of one 33% jump, this keeps the tenants happy.

This overlooks the point that the tenant has been getting an exceptionally good deal for a considerable amount of time. They can't up it to the market rent in two goes rather than one 33% go - they're locked into any increase for two years. By the time those two years have passed, the new market rate will have changed significantly too.

As a long time renter in Dublin, I never had any issues with my landlord. I called them if there were issues with plumbing, heating, electrics etc. That is clearly their responsibility and I'd have been pissed off if that was deemed to be "causing a nuisance" for the landlord or would make me a "bad" tenant. I paid my rent on time and I keep the place in decent nick - those are my responsibilities and I would never have felt entitled to any sort of discount because of it.

Speedwell

yqtwqxqm wrote: »

I saw on a TV show once where someone was selling a car and his wife thought he was asking too much when she heard the market price and what he was selling for.
The presenter got a steel bucket and handed the wife tickets for a €500 holiday, the difference between what his wife thought was fair and the market price, and then told her to put the tickets in the bucket. When she did he set fire to it.
All of a sudden it dawned on the wife what she was asking.
Pretty sure the tickets were fake, but it was a good lesson nonetheless.

Yeah, I'm buying a car, not buying a car and subsidising the seller's €500 holiday. The seller will accept a fair price for the car or I'll buy someone else's car. If they start by asking an overinflated, unrealistic price, that just signals to me that I don't want to do business with them in the first place because they have unnecessarily lofty expectations.

davo10

Speedwell wrote: »

Yeah, I'm buying a car, not buying a car and subsidising the seller's €500 holiday. The seller will accept a fair price for the car or I'll buy someone else's car. If they start by asking an overinflated, unrealistic price, that just signals to me that I don't want to do business with them in the first place because they have unnecessarily lofty expectations.

Yip, that's your prerogative but there are two things to consider, firstly if that is the market rate, other properties will be similarly priced. Secondly, another renter will probably pay it if that is the market rate so the LL probably won't mind if you object to the price.

Speedwell

davo10 wrote: »

Yip, that's your prerogative but there are two things to consider, firstly if that is the market rate, other properties will be similarly priced. Secondly, another renter will probably pay it if that is the market rate so the LL probably won't mind if you object to the price.

You may notice I live (and work) in a part of the country where the rental rates are half or less what they are in Dublin. I have turned down perfectly good job offers in Dublin because I refuse on principle to let some landlord have his boot on my neck in that way. I could afford to pay those rents but I've never been someone who likes to pay extra just for the sake of paying extra. I can make my own sushi; I don't have to live next door to it.

(Why don't I buy a house? I'm an immigrant. I'm not about to buy property here until I get citizenship, and when I do, I'll be over 50 and will have to find a shorter-term mortgage than usual.)

Speedwell

davo10 wrote: »

There is nothing whatsoever to prevent you from doing that, in fact for a commercial premices where there seems to be an abundance of empty units on every Main Street, it would be remiss of you not to.

But residential tenancies are different with different laws. The demand/supply issue means that if you offer lower then the market rate you are far more likely to be told to PFO than for a commercial let. Landlords are restricted from raising rents above market rate but are in no way obliged to accept lower than it.

If the landlord takes the top-rent properties on the market to calculate the market rent, I can take the bottom-rent properties on the market to calculate the market rent. Unless there's an equitable way to calculate the market rent that is neither of those two methods, like taking the average of all rents for similar properties. Right?

pconn062

While the OP seems very fair and considerate in her approach, how that things gotten so bad that €1400-1500 is the market rate for a 2 bed house in Dublin?! Well, I know why with the dire lack of supply, but how the hell are people able to afford almost a grand and a half a month on rent?! It's madness, we pay €550 a month for a 2 bed house in rural county Louth, really feel sorry for those forced to rent in Dublin.

EagererBeaver

Speedwell wrote: »

Yeah, I'm buying a car, not buying a car and subsidising the seller's €500 holiday. The seller will accept a fair price for the car or I'll buy someone else's car. If they start by asking an overinflated, unrealistic price, that just signals to me that I don't want to do business with them in the first place because they have unnecessarily lofty expectations.

I don't buy this at all. Whatever you pay, you're subsidising the value of his holiday. Rather, if he gives you a discount, he's subsidising you, not the other way around.

davo10

Speedwell wrote: »

If the landlord takes the top-rent properties on the market to calculate the market rent, I can take the bottom-rent properties on the market to calculate the market rent. Unless there's an equitable way to calculate the market rent that is neither of those two methods, like taking the average of all rents for similar properties. Right?

Wrong, if you pay exactly what the market will bare, it means you are paying what It is worth at that time. Simple market economics. The method does not have to be equitable anymore than it does when pricing any other commodity. Prices fluctuate depending on supply and demand, not based on fairness.

The same market forces are reflected where you live. There may be more properties, less demand and lower prices where you live than in Dublin where demand is high and supply low. Remember that there may be parts of the country where rents are lower than what you are paying and the people in those areas may consider your rent high. That is the market for you.

Turtle_

I think the OP is being very fair and I'd imagine her tenants have been expecting an increase for a long time.

OP, if the increase means you break even then you absolutely should go for it. I think it would be a good idea to show them the rent on similar properties in the area, though, so it's clear that they are getting a good deal. At €1300pm, they're getting about a 14% discount on the market rate, so it might be worth agreeing that they're getting the discount because you agree that going up to the full market rate would be a huge increase from their current rent, but if the market rates come down by anything less than 15%, their rent won't be coming down.

antoinolachtnai

Well I would consider pricing it on the basis of the market price - a percentage to factor in the cash required to put in new tenants. If the tenant is in a while, you would probably need to invest a few thousand in decor to spruce it up. You will still need to do this eventually but you would be able to defer it for a further year or two if the tenant were to remain. You won't get the maximum rent if you don't have the place modern looking and in good order. You also need to factor in the rental void.

Mary63

I suppose it all boils down to how much the landlord needs the extra money.

If the market can take it and the landlord is struggling then go for the max and risk losing a good tenant.Dont forget the cost of finding new tenants and if the letting is managed the management company will charge you a full months rent for finding new tenants.If you dont get tenants immediately you could be out of pocket foor a couple of months.

If you dont need the money and you feel the tenant is paying enough then leave things as they are.

Sometimes morally you should be charitable.

CruelCoin

Gael23 wrote: »

From €1050 to €1400 is a massive increase,~ 33% in one go. If that was imposed on me as a tenant I would leave a property. You say you have a good tenant that you clearly trust and that respects your property. That should be valuable to any landlord so why risk losing them?

They'd leave their home to try their luck on the open market where they'd not find anything for less than that €1400, and 20 viewers per home with it being leased out in a matter of hours/days?

The renters have every incentive to stay.

handlemaster

Mary63 wrote: »

I suppose it all boils down to how much the landlord needs the extra money.

If the market can take it and the landlord is struggling then go for the max and risk losing a good tenant.Dont forget the cost of finding new tenants and if the letting is managed the management company will charge you a full months rent for finding new tenants.If you dont get tenants immediately you could be out of pocket foor a couple of months.

If you dont need the money and you feel the tenant is paying enough then leave things as they are.

Sometimes morally you should be charitable.

Landlords arent charities

CruelCoin

fits wrote: »

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.

Rental prices in dublin only increased by 10-12% year on year q1 15 to q1 16.

https://www.daft.ie/report/ronan-lyons-2016q1-rental

To me, if it takes just short of 50% to bring it up to market parity, then this set of tenants have already had it extremely good for the last 2 years, and maybe before that too!

The landlord has already been taking far less than he could/should have.