Case Study: How Much is a Reasonable Rent Increase for Gold Coast Properties?

Reasonable Rent Increase on Queensland Properties

How Much is a Reasonable Rent Increase on the Gold Coast in Queensland? 

Image Realty established a case study to answer the question “How Much is a Reasonable Rent Increase on the Gold Coast in a Rapidly Changing Market.”  Our goal was to determine how to protect landlords from the increasing costs of property ownership without risking tenancy rates. 

How We Increased Landlord Income by $22,000 Without Risking Tenancy Rates

Overview

Sarah is a 45-year-old single woman renting a property in the booming suburb of Mermaid Beach.  After self-managing the property for more than a decade, Sarah was hesitant to increase the rental cost for fear of losing her tenants and the rental income she relied upon.  After interviewing Sarah about her challenges, Image Realty determined that her key issues included: 

  • The landlady relies on the property’s rental income to live and low tenancy rates would mean financial devastation. 
  • Sarah’s tenants were on a periodic lease creating personal financial complications and increased insurance costs. 
  • She is aware that the Mermaid Beach demographic has changed and is now a more desirable area than when she began her rental journey. 
  • She is aware that the Gold Coast property market is changing rapidly but unsure of how to respond to those changes. 
  • As her cost of living (and renting) escalated, she found the current rental fee was no longer covering her costs but couldn’t risk losing the tenants. 
  • Sarah’s relationship with her tenants was cordial and she feared losing them with a rent increase. 
  • Self-management was adding to Sarah’s ongoing “mental load” and was a source of constant stress. 
  • Sarah had actively avoided engaging a Gold Coast real estate agent for fear of loss of income. 
  • Her past negative experiences with real estate agencies made her hesitant to “hand over control of the property.” 
  • As a benevolent and involved landlady, Sarah feared upsetting her tenants as they enjoyed a personal relationship.  This extended beyond rental rates and into all aspects of property management. 

Approach

Like Sarah, Image Realty believes that great tenants are worth their weight in gold.  We determined that any action we took must include consideration for the existing tenant.  Our approach to property management is about negotiating a pleasing result for all parties, while ensuring our landlords – and landladies – receive the correct rental return for their properties. 

  • Using the data available and our team’s deep understanding of the Gold Coast property market, we determined that Sarah’s tenants were underpaying by $350 – $400 per week.   
  • We took into account the state of the property and its proximity to the water and amenities.   
  • We looked at rental projections for the period of the new lease to ensure that Sarah would receive market value rent throughout the next lease period. 
  • We examined the property to determine upcoming costs associated with its maintenance and factored in projected rises in rates, insurance, taxes, and other burgeoning costs. 
  • We determined, looking at the rental market over the past few years, the “fixed” rent had cost Sarah around $90,000 and that the tenants had been on an “unfair deal.” 
  • We stepped Sarah through the data to help her feel confident that a rental increase of this size was not only justified but long overdue. 
  • Once confident, Sarah felt better about increasing rent but was still concerned about losing a great tenant. 
  • We offered Sarah our “Tenancy Guarantee” to waylay any fear of long lapses in tenancies.  This gave Sarah the confidence to engage Image Realty despite her negative experiences with other Gold Coast agents. 
  • Our Gold Coast property manager stepped in, saving Sarah from discussing this with her tenants.  We showed the same data to the tenant, helping them to understand why a rental increase was necessary while reassuring them that both Sarah and Image Realty wanted them to remain in the property.  
  • We were able to clearly, and unequivocally demonstrate to the tenants that a rental increase was long overdue.  The tenants agreed that this was the case. 
  • We moved the tenants onto an annual lease at an increased rental rate of $400 per week.  This greatly reduced Sarah’s insurance costs and fear of loss of income. Landlord’s insurance through an agency is approximately $330 per year, with some insurers refusing to cover self-managed properties. 
  • As the tenants enjoy a personal relationship with their landlady, our team adopted a friendly and hands-on approach. This means that the tenants will come straight to Image Realty if there is a problem, lightening Sarah’s mental load.   

Happy client with a Rent Increase Queensland

Results 

In the current Gold Coast market, we determined that the reasonable rent increase for this Mermaid Beach property, formerly self-managed with limited past rent increases, was an increased rental rate of $400 per week.   

Conclusion

As the market changes on Queensland’s Gold Coast, the expectation of a “reasonable rent increase” changes with it.  The peak period of migration has resulted in a shortage of properties meaning that increases in rents is not only inevitable but a key part of managing the property market.   

This case study also demonstrated that while landlords and landladies formerly chose to self-manage to minimise property ownership costs, this practice is detrimental in today’s market.  By avoiding a professional property manager, Sarah was, over a period of six years, progressively losing profitability.  Sarah eventually reached the point where she was “missing out on” over $20,000 per year through lost rental income – which far exceeds the cost of property management through Image Realty.   

Sarah’s case study is just one example. This case study was prepared after working with dozens of “Sarahs” throughout the pandemic period.  Image Realty can help you and your tenants to thoroughly understand what a reasonable rent increase on the Gold Coast, in Ipswich, Logan and Brisbane really means. 

Talk to us now. One phone call increased Sarah’s income by over $20,000 per year – isn’t it time you did the same?

Contact Image Realty today 

 

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