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The good tenant v higher rental income debate

By Staff Reporter
08 June 2021 | 1 minute read

With rent prices rising across the nation, landlords are struggling to strike a balance between maintaining a good business and holding on to good tenants.

As the rental market tightens, pushing up rental prices across a number of Australian capital cities, Momentum Wealth is advising landlords to very seriously consider whether the benefits of keeping good tenants in a property will outweigh expectations of increased rental income. 

The group has offered up three reasons that property managers can pass on to their landlords as to why it can pay to keep good tenants.

  1. They will care for your property

Good tenants can be hard to find, and if you’ve managed to secure a happy tenant, it can pay to keep them in your property. Good tenants will care for your home as if it were their own, ensuring no damage is done and keeping the property neat and well maintained. Property managers know that this can help minimise the cost of ongoing maintenance and repairs.

For landlords who have had the same tenant for an extended period, then it is likely that they will want to stay well into the future, and this can help minimise any vacancy periods moving forward.

  1. No vacancy periods

Even in extremely tight rental markets, it’s likely landlords will suffer through at least some form of vacancy period — an automatic way to lose money.  

Looking more long-term, while the rental market is tight now, it will likely correct itself in the medium term as more rental properties come on stream to help satisfy demand.

Momentum Wealth concedes that where landlords do opt to re-lease the property at a higher price, they risk the new tenant choosing to move on once their lease period is up.

This can mean a longer vacancy period in the not-too-distant future.

Property managers can ensure their landlords are taking on board both the immediate and also long-term risks and impacts that bringing in a new tenant may have.

  1. No costs associated with re-leasing

In addition to considering the potential for lost income while a property sits vacant, property managers are well versed in the costs associated with re-leasing a property.

Letting fees, marketing costs and promotional tools all cost money.

While rents are increasing, property managers are also witnessing a rise in tenant expectations. It’s worth letting landlords know that when prospective tenants are being asked to pay higher prices, they often expect properties with more features or that are better maintained.

If a client does decide to re-lease their property, then property managers will be well positioned to provide advice around what tenants in the area are demanding.

Without features like air-conditioning or a dishwasher, landlords may not achieve the rental price they’re looking for, or may need to fund such purchases to add value.

The best of both worlds

“As we’ve outlined above, sometimes it can make sense to keep the current tenants that you have, but that doesn’t mean that you need to miss out on increased rent altogether,” Momentum Wealth said.

This is where good property managers can come in: being able to work with a tenant to come up with solutions that suit both parties, and one practice could be to incorporate rental increase clauses into lease agreements.

The good tenant v higher rental income debate
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