# Should you increase rent on yearly review.



## suicra05 (26 Jan 2006)

Have 3 bed rented to tenants for 1230 euro in D 16 area. This is approx 100 euro below the going rate. Should I increase the rent a little at the yearly renewal which is next month. Tenants are good as they have been no major hassle. Advice please .


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## Ciaran (26 Jan 2006)

Don't think so. You're lucky to have tenants that aren't any hassle. If you raise the rent, they could well move out, leaving you stuck with the problem of getting new, possibly more difficult tenants. I'd be inclined to count your blessings!


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## markowitzman (26 Jan 2006)

I put the fact that rents will increase by inflation (cpi I think but not sure) as condition in initial contract which makes subsequent raises easier.


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## delgirl (26 Jan 2006)

suicra05 said:
			
		

> Have 3 bed rented to tenants for 1230 euro in D 16 area. This is approx 100 euro below the going rate. Should I increase the rent a little at the yearly renewal which is next month. Tenants are good as they have been no major hassle. Advice please .


I don't see why not - if you're sure it's about 100 under the going rate.

Interest rates have just risen, my building insurance also went up slightly so I'll be increasing rent by €50 per month.


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## Max Hopper (26 Jan 2006)

Uhh, based upon what have you determined 'the going rate'? I posed this question earlier in the month and it drew blank stares and silence from all of the landlords on AAM.

As for the CPI being a guide, that is one way, if not a supportable one. Market forces are what the PRTB looks at. Nothing more.


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## hmmm (26 Jan 2006)

The heat has really gone out of the rental market, and tenants nowadays would know that they can relatively easily move if needs be. (speaking as a tenant) I don't care that my landlords expenses have increased, if you increase my rent and I can get cheaper elsewhere I'll move.


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## markowitzman (27 Jan 2006)

hmmm rather than moving I would advise you to negotiate with your landlord if he is providing a well maintained property. As a landlord I want occupancy. I want happy tenants on long term leases (yearly rather than six monthly). I will always drop rent to get someone for a year as it generally takes a month to relet a sixmonth. To be honest I now market it as a year lease at lower rent. The cpi yearly bumps the rent along but it really always stays slightly below market. As I have said from my perspective occupancy is the key. In a really slow market I might throw in a fill of oil etc (tax deductible for me). So negotiate, develop a relationship with the landlord and do not assume that it is just a rent increase that they want.


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## micheller (27 Jan 2006)

I'd be the same, as a tenant- if the rent was increased, I'd move. 
In fact I'll be looking around to see what the market's like a month or two before our contract ends to ensure that I know and can move if needs be. If I can find a cheaper place than this, I'll consider moving anyway.

I'd assume that if the landlord really didn't want to lose you as a tenant- they would either a) not increase or b) climbdown if you said you wouldn't accept the increase?


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## markowitzman (27 Jan 2006)

My point being that as it is in contract there are no surprises.
Rent increase to be expected by both parties.
If landlord liked tenant and wanted to hold them then could negotiate on things like a fill of oil etc.
Did this only a couple of months ago.
Rent charged still went up and as a landlord got deductible expense on oil.
So still nett gain to me whilst no appreciable increase for tenant.
Possibly using tax laws to keep all happy!
If after this negotiation the tenant wanted to renew at same rent then I would not stand in their way if they wanted to go elsewhere.
To be frank if rent does not go up by inflation landlord loses out.
Maintenance and other charges increase but rent decreases in real terms.
The danger is if I accept a no rent increase then my maintenance budget gets too tight and the property suffers as a result.
Property is too expensive at present and rental yields too tight to risk a property going downhill.
If the property goes downhill it is more difficult to relet and the investment suffers.
I feel as if I must do this as I have said above that my rents are generally below market but for 12 months duration.
If I do not increase rents year on year the investment does not remain viable.


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## hmmm (27 Jan 2006)

The trouble here is that you are looking at the rent you charge as being a factor of your expenses - "my costs increased by 100 euro a month, therefore I will increase the rent by that, that's fair". But it's not because rent is a figure decided by the market and not by individual landlords - if you increase the rent you run the risk of having your tenant leave, and if as a landlord you said to me "I'm increasing the rent because my expenses have gone up" my attitude would (mostly) be "I don't care".

In saying that I've been with my own landlord for over 5 years now, he charges slightly below the market rate and treats me professionally. In return he gets a long term and careful tenant.


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## markowitzman (27 Jan 2006)

ny increasing rent by 2-3% per annum and throwing in something like oil I feel both sides win.
Your landlord has the same philosophy as me.
Many landlords I talk to do not understand that their greatest expense is vacancy.
Did your rent increase much over the past few years despite being still under market?


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## dam099 (28 Jan 2006)

markowitzman said:
			
		

> Rent charged still went up and as a landlord got deductible expense on oil.


 
Increasing rent by E100 and giving the equivalent in free oil worth E100 will have compensating tax effects so there is no tax advantage to this approach (except maybe timing).


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## markowitzman (28 Jan 2006)

Not an equivalent deal though. Rent increase generally more but not always. From a timing perspective you are right. Limit tax liability in present tax year with the assurance of greater rent in next tax year. Suppose it is a form of deferred tax.


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## delgirl (28 Jan 2006)

hmmm said:
			
		

> The trouble here is that you are looking at the rent you charge as being a factor of your expenses - "my costs increased by 100 euro a month, therefore I will increase the rent by that, that's fair". But it's not because rent is a figure decided by the market and not by individual landlords - if you increase the rent you run the risk of having your tenant leave, and if as a landlord you said to me "I'm increasing the rent because my expenses have gone up" my attitude would (mostly) be "I don't care".
> 
> In saying that I've been with my own landlord for over 5 years now, he charges slightly below the market rate and treats me professionally. In return he gets a long term and careful tenant.


I am increasing my rent by €50 Euro from next month and will still be under the going rate for the area.  If the mortgage interest rates and insurance premium hadn't risen, I would be increasing at all - so it's not a case of "my costs increased by 100 euro a month, therefore I will increase the rent by that, that's fair". 

The letting of property is a business and not a charity.  If the price of petrol rises in the morning, you can be guaranteed that hauliers will increase their prices to pass on the extra cost to their customers.  Why should it be any different for a landlord?

I too have long term tenants, charge slightly below market rate and treat them as I would want to be treated myself.

I will only increase the rent in one property next month - in the other one I have a single mother with two young children who I know could not afford an increase, even though my costs for mortgage interest, insurance and refuse disposal have increased.


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## ninsaga (28 Jan 2006)

Am in the similar situation right now.. with the recent interest rate hikes it has taken a chunk out of the net income. I did consider a hike but knowing the way the market is (although somewhat bouyant).... tenants are on the move.... the amount I have to make up would be wiped out again due to unoccupancy.

If I had a bad tenant I wouldn't hesitate...but a good tenant changes the situation somewhat.

However there is another interest rate increase pending....this being the case then I would have no choice but to go for an increase.

ninsaga


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## Murt10 (28 Jan 2006)

delgirl said:
			
		

> in the other one I have a single mother with two young children who I know could not afford an increase, even though my costs for mortgage interest, insurance and refuse disposal have increased.




Is the single mother on Rent Allowance paid by the Health Board. If she is, and you increase the rent, she will only have to pay the same amount. If you are charging below the going rate the HB will pick up the increase. 

Your tenant will continue to pay the same tiny amount.


Murt


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## Mrs Aol (28 Jan 2006)

Every time I change tenants I up the rent on my properties a little bit. I wouldn't like to raise it with sitting tenants though.


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## RainyDay (28 Jan 2006)

I'm somewhat bemused by all these landlords who are renting for 'under the market rate'. Isn't the market rate (by definition) the rate at which you are renting?


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## MOB (29 Jan 2006)

It depends on how you define the market rate.   There is definitely inertia in most tenancies which means that after a year or two, the rent is likely to be less than would be charged to a new tenant (which is what posters seem to define as the market rate).  However, if we were to define the market rate as being the average across a sector, then instead of saying that sitting tenants were paying less than market rate, it would be true to say that most new tenants pay over the market rate.  A matter of perspective.


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## beattie (29 Jan 2006)

Seems to me that it could be a case of 'penny wise, pound foolish', if the landlord is willing to risk having the property lying vacant while looking for new tenants it could negate any upside in rent. As a tenant I wouldn't accept if I was told that my rent was being upped and would start looking elsewhere especially with the market today.


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## markowitzman (29 Jan 2006)

beattie I think with interest rate rises on the way you had better steel yourself for rent rises. In my experience property does not lie vacant for long when I am charging less rent than others. Tenants know I charge less and they know it is increased year on year so there is no cloak and dagger stuff. I encourage tenants to check the market a couple of months prior to end of tenancy as it is a free market. When they do they invariably find that there is no financial incentive to do so.


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## kirian (29 Jan 2006)

I don't see why rent should necessarily rise when interest rates go up. The market rate for rent is determined by supply and demand of rental properties. If interest rates rise do people see either supply or demand being effected?

Perhaps investors will be less likely to buy investment properties if interest rises so supply will be reduced (less demand for properties = house prices going down?). But I see pleanty of vacant properties so I think renters have the stronger hand at this time.

I don't really know how it will play out. What do people think? If interest rates go up will rents rise too?


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## markowitzman (29 Jan 2006)

Supply and demand issue I would agree with.
Also I think a key factor is affordability of property for first time buyers.
As interest rates increase I think this may keep people inthe rental sector.
More importantly I think the lending policy of the banks could be a key issue.
Central bank musings recently could signal an imposed tightening of lending policy.
This could be a driver also in the rental market.
I also think first time buyer stuff will see significant price rises as ssia policy maturity coincides.
So I think the demand side could well increase but who is to know.
In answer to your question I nor noone else knows but the potential reasons for general rent increases are multifactorial.
Where do you see the vacant properties?


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## sudden (29 Jan 2006)

in cork,from what i can see, there are very few rental properties vacant for long.

sudden


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## hmmm (30 Jan 2006)

I'm bemused by this talk of raising rents if interest rates go up. In order for you to succeed with this strategem, you would need *every* landlord in your price bracket to increase at the same time - otherwise your tenants will move on (in an idealised world - obviously some people will have different levels of inertia to moving). The "market rate" for rentals is driven by supply and demand, and not by your level of expenses. Again, as a tenant, I don't care that your expenses have gone up because I have freedom to go a competitor.

I remember a time when you had to queue to be interviewed by a landlord, and when there were perhaps 15/20 other people in this queue. In Dublin at least, that's no longer the case. If I had a landlord come to me in the current market and said he was upping rent by 50/100 euro a month, I'd be off.


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## gearoidmm (30 Jan 2006)

Absolutely.  I remember trying to find a place when I moved to Dublin first 6 years ago and you basically had to know someone.  Once when I moved house I agreed to find someone to move into my old room and I got 50 phonecalls and messages in 4 days - and this room was in Clonskeagh!

In contrast, last year when my girlfriend and I were looking for a place, we saw 2 we liked, were offered both and we negotiated the rent down by E100 a month before we eventually signed the lease.  The idea that landlords can increase rent in the current climate just because costs are increasing is laughable.  Costs have been increasing for the last 4 years but rents have fallen all over the country.  The market always dictates prices and there is a plentiful supply of rental properties.  If my landlord increases the rent, I'll move.


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## lukegriffen (30 Jan 2006)

hmmm said:
			
		

> I remember a time when you had to queue to be interviewed by a landlord, and when there were perhaps 15/20 other people in this queue. In Dublin at least, that's no longer the case.


 
God, that brings back a lot of bad memories.  I remember looking to house-share in the early/mid 1990s, knowing you hadn't a hope of getting a room in a decent area, coz males tended to want to share with females, & females usually preferred to share with females, & when you went to the house it was always 'sure we'll let you know', & that was the end of that, coz there'd always be 30 to 50 people looking at the room.  Not only was it difficult to get a place, your self-confidence also took a bit of a bashing.


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## Amygdala (30 Jan 2006)

Firstly, hello to everyone. I have read this site with great interest for awhile and this is my firsy post.
I have been a tennant in dublin for the last 7 years and have also experienced the nightmare that was the "landlords market". The market rate is defined by section 19 of the Private Residential Tenancies Act 2004 as "_the rent which a willing tenant not already in occupation would give and a willing landlord would take for the dwelling_". There is no provision for the increase in landlords overheads unless the tennant is willing to accept this.     Perhaps it is the landlords new to the market with very tight rental yields who feel underpressure to raise rents. If this is the case then I have some sympathy with your case. But I too would leave if a rent increase was imposed on me. And I am sure that if the market swings back tennants will have to obey the market forces once again.


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## beattie (30 Jan 2006)

Have to agree with the sentiments expressed in the most previous posts, the pendulum has swung back in favour of the tenant and if current building levels continue at the current pace I feel that it still has further to go yet before equilibrium is achieved. I do not care what costs are increasing for the landlord, that is the risk he/she took when making the investment. The market doesn't care what price you paid for your investment, be it in equities or property etc....


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## markowitzman (30 Jan 2006)

I suppose the key question is there many properties vacant?
All our properties are rented. We increase rents yearly and have had no vacancy as a result. Maybe we are just lucky although I doubt it. Properties are well maintained and responses to tenant requests are speedy. Our properties are in scenic locations in the countryside. This may have something to do with things as many of our prospective clients are dying to get out of appartments and 3bed semis in large towns in the area. I assume that the renters on this thread are in urban appts?
Where are the areas with large amounts of vacant properties?
Thanks.


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## Amygdala (30 Jan 2006)

I my experience the only time there is a geographic cluster is when a new development comes on-line. Otherwise it tends to occur in the middle price bracket of the most common types of units ie two bed apartments anywhere in the city.


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## markowitzman (30 Jan 2006)

So newbie are rents dropping for 2beds in city? Can you give us personal experience? Are they consistent with the research on daft.ie?


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## kazbah (30 Jan 2006)

Yes I'm a 3bed semi in Cork.


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## Amygdala (30 Jan 2006)

> So newbie are rents dropping for 2beds in city? Can you give us personal experience? Are they consistent with the research on daft.ie?


 
I have been following the two bed rental market in Dublin over the last year as I plan to move when I graduate in summer and have also been following the Daft quaterly reports, IAVI reports etc. and although they say that the rental market has stopped its decline and stablised... I find statements like these to be more a " positive affirmation" to maintain confidence in investers rather than a solid statistical conculsion.


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## markowitzman (30 Jan 2006)

So to be clear you are saying the rental market for 2 beds in dublin is still falling and you would disagree with the findings of the daft research?
Would agree that statistical interpretation is open to variance.
What elements of the stats of this survey do you question?
Is this based on your personal experience or do you have a large enough cohort to make your findings more than just conjecture?


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## markowitzman (30 Jan 2006)

sorry http://www.daft.ie/report/BandF-version.pdf


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## gearoidmm (30 Jan 2006)

Currently 2800 properties advertised on Daft for rent in the Dublin area including 240 in D2 and D6 alone.  Admittedly some of these are repeatedly entered.  Certainly no shortage of properties going by that.

Asking prices for rents seem to be increasing, particularly for newer developments.  You can still get good 2-bed apartments in good developments for around E1200-1300.  You'd be mad to agree to pay much more.


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## Amygdala (30 Jan 2006)

> So to be clear you are saying the rental market for 2 beds in dublin is still falling and you would disagree with the findings of the daft research?


I never said two beds are still falling. I simply disagree with the commentary that things are looking up for landlords. A plateau in prices can go either of two ways and to assume that it can only go up is misleading.



> Would agree that statistical interpretation is open to variance


If what you mean is statistical variance then i do not see how these values can be interpreted with respect to trends... Simple defintion is that they reflect distribution around a mean.



> What elements of the stats of this survey do you question?


 
The lack of statistical analysis of negotiated rents, their methodolgy only includes advertised rents.



> Is this based on your personal experience or do you have a large enough cohort to make your findings more than just conjecture?


 
Personal experience of course....I believe dafts cohort large enough to statistically significant .... And once again I will state that i disagreed with their commentary.


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## markowitzman (30 Jan 2006)

I think daft is best research at present.
However I do agreewith you that they have a vested interest to talk up the market as they want landlords to use their services.
The next daft report will be interesting.
Do any of the tenants on this thread hope to buy this year with the proceeds of ssia?


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## kazbah (30 Jan 2006)

As I am single I cannot afford to buy on my own yet. Even though I am on a good salary and good savings. I will reinvest my ssia until I am in a position to buy.


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## markowitzman (30 Jan 2006)

have you pleaded your case with the banks?
Have you got an independent financial advisor to fight your corner?
If you had 20-30k as a deposit I think you are in a stronger position.
What salary and savings do you have?


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## kazbah (30 Jan 2006)

markowitzman said:
			
		

> have you pleaded your case with the banks?
> Have you got an independent financial advisor to fight your corner?
> If you had 20-30k as a deposit I think you are in a stronger position.
> What salary and savings do you have?


 
€41k pa circa €30 in savings but some of it is tied up in investments but I could liquidate at notice.  If I were to buy it would as an investment property as I could not afford the mortgage on my own and I would not like to be a live in landlord.  I'm nervous about buying a first property in this climate.


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## markowitzman (30 Jan 2006)

if I was you would buy 2 bed and rent a room........tax free rent
30k plus ssia is a good deposit
bank can take security on the investment products so you do not necessarily need to liquidate them.
However they may take a perceived value of 50-60% of market value of investments for security.


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## gearoidmm (31 Jan 2006)

markowitzman said:
			
		

> Do any of the tenants on this thread hope to buy this year with the proceeds of ssia?


 
Similar apartment to the one I'm living in went on the market for E750,000 last year.  Despite that I'm paying ~E1300 rent.  Fantastic place in a great location that I couldn't afford to buy in - I can't see why I should buy someplace I don't really want to live when I can rent much more cheaply!

I think I'll go on a nice holiday instead


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## Holy Well (2 Feb 2006)

Fair point Gearóid


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