Once you have placed your tenant, you want to ensure you get the most out of your investment property financially. But, knowing when you can apply a rent increase will keep you on the right side of the law.
If you have signed a new lease and have not specified within that lease of a rent increase, then you must wait until the renewal of that lease or once the lease becomes periodic (month-to-month). On the other hand, you may have as a condition to the lease that there will be a rent increase during the agreement. Say for instance, you have purposely rented the property below market value to find a quick tenant, you may have as a proviso that there will be a rent increase in 6 months. The tenant must be made aware of this and be happy to sign the lease agreement to go forward.
If your property is outside of a fixed lease agreement, then you can increase the rent only once every 6 months. This doesn’t mean you can just put the price up as you see fit. If you were to increase the rent inline with market value, then you will be safe. But, if you push the rent beyond, the tenant can take you to VCAT and challenge the increase.
Bear in mind, that if you apply a rent increase, you stand the chance to lose your tenant and will have to go through the process to find a new one. This means letting fees and time without income. You must weigh up these options and understand whether the extra rent will cover the costs. Instead of being strong minded about your rent increase, you should leave some room for negotiating and find an outcome that suits everybody. Whether it be a small increase now and further one in 6 months or just coming to an agreement on a fixed price and locking it in for another 12 months.
The following advice is of a general nature and intended as an opinion and broad guide. For all legal, financial or real estate advice you should obtain independent professional advice to do with the specific nature of your circumstances before making any legal, financial or real estate decisions.