fbpx

Flipping a good tenant VS making them a keeper!

By August 27, 2018 News

Landlords, ever heard this before?

“We’ve conducted a market review & believe that we can easily get you a 10% increase on the monthly rental return for your investment property… Now your existing tenant might resist this increase, but there is strong demand for similar properties to yours in the area & we are very confident that other suitable tenants can be found…”

Before jumping, let’s unpack this further…

Whilst a 10% increase sounds great in theory, the truth is that you are going to be up for a bunch of additional costs also that will quickly eat into the extra returns

Using a $500 p/w rental property with annual revenue of $26,000 per annum as an example, the current fees could be to relet the property with the same tenants:

$1,560 – Property Management Fees (6%)
+ $156 – GST
+ $1,000 – Lease Renewal Fee (2 weeks)
+ $60 – Administration Fees ($5 p/m)
+ $88 – Annual Statement Fee

$2,864 = Total Fees
$23,136 = Total Rent Received by Property Investor

Now if we consider the 10% increase to a $550 p/w rental property with annual revenue of $28,600 per annum as an example, the current fees to replace your current tenant could be:

$1,716 – Property Management Fees (6%)
+ $171 – GST
+ $60 – Administration Fees ($5 p/m)
+ $88 – Annual Statement Fee
+ $1,650 – Re-letting Fee (3 weeks)
+ $390 – Internet Marketing Fee
+ $175 – Professional Photography Fee
+ $110 – Video Walk Through Marketing Fee
+ $55 – Tenancy Database Check Fee

$4,415 = Total Fees
$24,185 = Total Rent Received by Property Investor

On the surface this looks pretty good, you have moved your annual return from $23,136 to $24,185 an increase of $1,050, however, this isn’t right as we need to include the ‘vacancy gap’ (an average of 3 weeks) before the new tenants move in…

So what is the real return once we factor this in?

$24,185 – $1,650 (3 weeks vacancy gap)
$22,535 = Real Total Rent Received by Property Investor

Hang on – you are now $600 WORSE OFF than if you had kept the original tenant without an increase!

At OurWalls we want to shine a spotlight on the hidden costs of flipping good tenants and highlight the real opportunities that exist for landlords who look after their tenants.

Consider your existing tenant who has proven to be a good payer over the last term and now they intended to stay at the property longer-term.

This tenant is a keeper and landlords have the opportunity to remove agent fees seen above and get back in the game as a real investor using the OurWalls tools, guidance and support. Don’t risk losing a great tenant… your new keeper by increasing the rent disproportionately! Many other benefits follow where the keeper tenant invests themselves in the property, their home.

The return factoring our scenario:

$120 = OurWalls DIY Member Fee
$25,880 = Total Rent Received by Property Investor

Where else can you increase your returns by 10% PLUS just by giving your investment better attention?

So next time you are advised to increase your rent and risk FLIPPING a great tenant, make sure that you run the numbers & calculate the REAL costs before pulling the trigger.

OurWalls encourages you to make them a keeper!

There is a better way for you to control of your property investment with www.ourwalls,com.au