If the headlines are to be believed, we’re living through Australia’s worst housing crisis in a generation.
The Guardian warns us that tenant’s “morale plummets and homelessness looms”.
The SMH gives tenants guides on their rights should rents be increased and how to find a home in a “tight rental market”.
Interest rates rose faster than you can cook a burrito and could climb further still.
In the midst of all of this is you, the property manager, trying to do your best.
Every time I see a news story brandishing the decline of society as we know it, because of the so-called ruthlessness of agents and landlords, I cringe.
Our job is about people.
The landlords who rely on us to ensure their investment is maintained and their income provides them with the means to grow their personal wealth.
And the tenants, who, well…need a home.
And as property managers, we care about people!
So, when our job becomes the villain of the century, the Sylvester to Australia’s Tweety Bird, we take it a little more personally than we probably should.
We don’t want to be the reason tenants around the country wake up in cold sweats in the middle of the night.
Nor the reason they become homeless (gulp) because we had to increase rents to market value.
Call it the current economic state, housing availability, federal and local planning and policy – we are not the problem.
Equally, we are not helpless.
So how can property managers support landlords in increasing their returns, while softening the blow of increased rents and the demand on rental properties for tenants?
Improve landlord return
The increased cost of investment ownership is causing pain for investors nationwide.
Rent increases are just one option for landlords. Below are some other ways you can help your landlord clients:
- Depreciation schedules: Remind your landlord clients about how they can maximise their returns at tax time by ensuring they’re claiming the correct amounts through their qualified tax professional.
- Reviewing interest rates: This is an obvious one but it’s often overlooked by investors. Suggest they look into refinancing to see if they can get a better interest rate and save on their monthly repayments.
- Market value rent increase: When we increase the rent in line with market value we minimise vacancy should the tenant vacate. A $50 per week increase soon gets offset with letting fees, advertising and vacancy. Take the time to review the numbers and provide the owner with the options and your reasoning. Make yourself the trusted advisor.
Reducing shelter fear for tenants
Securing a rental and being able to afford to stay there are significant concerns for the modern-day renter. How can you support the tenant while acting for the owner and keep everyone happy?
- Language matters: “Yay I got a rent increase,” said no one ever. But how you manage this situation will keep the temperature on the cooler side of boiling. Firstly, saying, “The landlord’s costs have increased,” is a big no-no. A tenant doesn’t care about the landlords cost’s, it’s a red rag to a bull, and it should not be a reason for an increase in rent. Keep your conversations market value specific and say, “Your rent is being increased to reflect the current market value” instead.
- Transparency and open communication: In having these conversations…and I mean a call, not a drop-and-run email, be prepared to negotiate. Is a great tenant worth more than losing them? Is the rent they can afford actually acceptable to your landlord? You won’t know if you don’t ask.
- Think outside the square: With fear being heavily driven by a lack of housing, the security of a fixed-term tenancy can soften the blow of a rent increase. For long-term investors, this often bodes well for their position too. With most states and territories removing ‘no reason’ terminations, the method of evicting a lease-breaching tenant is the same for a fixed tenancy and as an ongoing, so the security of a fixed tenancy may actually create a better relationship for all involved.
Helping our landlords and tenants through this time comes down to educating, asking our clients the right questions and understanding their needs and fears.
We have to work harder now than ever before at being fantastic advisors to our clients. Don’t be afraid to have genuine conversations.
Our greatest tool, is also our greatest strength – communication and connection. We’ve got this!