How much how good tenants actually worth??

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mountainboy

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How much are good tenants actually worth??

I have a few rentals where tenants has been there approx 5 years on average

Always pays on time, few maintenance issues, general little to sometimes no problems

But over the last few years, rentals has skyrockted to a point where the existing rentals are now becoming significantly lower than asked in the market, such as

Unit 1: Current R6050, proposed by the the agency few months ago to be between R7000 - R7500
Unit 2: Current R5500, proposed R6500
Unit 3:Current R5950, market anything between R7000 - R9000 for high end units in the complex

Increases over the years has been 7 - 9% (I charged 10% once I think)

The difference is starting to add up to a princely sum

I have checked on market rates of what is being advertised and there is a severe shortage of stock and even when I gasp at rentals charged, the add is removed shortly after indicating tenant found.

Landlording 101 always states to hang on to good tenants at all costs but at what point is the difference worth the risk of losing them and possibly replacing them with potentially equally good tenants or possible defaulters, which I have never had BTW

And with junk status upon us, cost of credit will force more ppl into renting
 
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Its your property to do with what you please, but its dick move to kick people out for a few extra bob.
 
I personally charge my good tenants about 20-25% below market.
 
cguy said:
I personally charge my good tenants about 20-25% below market.
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How did you arrive that figure? The discount vs cost of potential damage, additional repairs etc

Surely there has to be some guidelines when the figures simply don't make sense anymore.

I'm all for keeping good tenants and have a 10% 'discount' figure in back of head but it's beginning to push 15 - 20%
 
mountainboy said:
I have a few rentals where tenants has been there approx 5 years on average

Always pays on time, few maintenance issues, general little to sometimes no problems

But over the last few years, rentals has skyrockted to a point where the existing rentals are now becoming significantly lower than asked in the market, such as

Unit 1: Current R6050, proposed by the the agency few months ago to be between R7000 - R7500
Unit 2: Current R5500, proposed R6500
Unit 3:Current R5950, market anything between R7000 - R9000 for high end units in the complex

Increases over the years has been 7 - 9% (I charged 10% once I think)

The difference is starting to add up to a princely sum

I have checked on market rates of what is being advertised and there is a severe shortage of stock and even when I gasp at rentals charged, the add is removed shortly after indicating tenant found.

Landlording 101 always states to hang on to good tenants at all costs but at what point is the difference worth the risk of losing them and possibly replacing them with potentially equally good tenants or possible defaulters, which I have never had BTW

And with junk status upon us, cost of credit will force more ppl into renting
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Was renting a place...smack bang in the centre of Green Point, for an absolute steal. After 4 years of renting, with agreement up for renewal for another 24 months, landlord conveyed that the rental could achieve about 25% more than what it was going at. We all adults, I saw his point of view, as he also could appreciate mine...refusing to pay 25% more. End of the day, you want to get the maximum return out of your investment....nothing personal, business is business.
 
yebocan said:
Was renting a place...smack bang in the centre of Green Point, for an absolute steal. After 4 years of renting, with agreement up for renewal for another 24 months, landlord conveyed that the rental could achieve about 25% more than what it was going at. We all adults, I saw his point of view, as he also could appreciate mine...refusing to pay 25% more. End of the day, you want to get the maximum return out of your investment....nothing personal, business is business.
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If you knew it was an absolute steal surely you expected it to change at some point?
 
Personally I think this question is like a two way street.

If you are doing your job as a landlord, and the tenants are doing their bit, look after them i would say.
 
I have two tenants at -40%

Reasoning is I'm such a great guy.

For the same reason, my wife hates me whenever the subject comes up.

Have started a strict 10% increase though.
I want to sell one property... but feel too bad doing so while the tenant's kids are still in school.
 
At the rental figures you are talking about I would be playing with a 20% "discount" on market related for good tenants.

Never ever ever ever underestimate how much a bad tenant will cost you, that extra 20% you "charge" them will disappear quickly when they stop paying rent, or screw something in the property up. I've had 2 bad tenants on a R4k granny flat, one of them ended up costing me around R4k to fix shyte they had screwed up, the other I stopped tallying up the costs and just changed tack altogether and redeveloped the granny flat for my parents instead. The lack of rental sucks but the lack of issues is worth more to me than the rental figure.
 
chunk10 said:
Its your property to do with what you please, but its dick move to kick people out for a few extra bob.
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And it could come back to bite you in the arse,with the current uncertain economic and political climate you need stability,a lot of new tenants will be fly by nights who are more effort than they are worth.
 
mountainboy said:
How did you arrive that figure? The discount vs cost of potential damage, additional repairs etc

Surely there has to be some guidelines when the figures simply don't make sense anymore.

I'm all for keeping good tenants and have a 10% 'discount' figure in back of head but it's beginning to push 15 - 20%
Click to expand...

It's primarily about keeping them in the property, despite them perhaps wanting a change, bigger space, more convenient location, etc. 10% less likely won't keep most, but 20-25%% certainly will. That's an extra $600-800 in their pocket per month in my case). For me, it's $300-400 less per month due to taxes. I have never had a complaint about my current tenants, which is a big plus - I would hate to be in a situation where my tenants are making noise or behaving improperly, and having to deal with that - I factor that in more than the replacement costs of what is in the apartment. Being in a relatively expensive area, the cost of the interior (floors, appliances, etc.), is relatively cheap in comparison to the rent, which would allow me to take more risk at a higher rental rate, but I value lack of drama above this - anyway, this is something everyone just has to weigh up: If it's a big piece of one's income, it's generally worth more work to get a higher rent, otherwise it may have a huge opportunity cost.
 
Must say, I'm surprised most saying 20-25% discount. That is quite a substantial amount if one includes the opportunity cost of that discount.
 
mountainboy said:
Must say, I'm surprised most saying 20-25% discount. That is quite a substantial amount if one includes the opportunity cost of that discount.
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Well think about how many months it would take to make up for a bad tenant not paying for a month or two. Or causing other issues.
 
mountainboy said:
Must say, I'm surprised most saying 20-25% discount. That is quite a substantial amount if one includes the opportunity cost of that discount.
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You are forgetting the negative opportunity cost of having a bad tenant

To give you an idea I know someone who is in for r15k lawyers fees to evict a bad paying tenant and they still are unsure what extra costs will be involved in terms of damage to the property
 
A friend of mine had a tenant that made excuses for not paying rent and eventually left of his own accord, owing R30k. Not something you want. I had a tenant in for 2.5 years. Always paid on time, no problems, kept me aware of any maintenance issues etc so I never increased the rent in that time.

You also need to take into account financial situation. Some people have had their properties for 5-10 years or more and the cost of bond repayment and other overheads are probably easily covered and at least a small profit is being made so it is worth while to keep a good tenant in for cheaper and it is also doable.
 
This is a very good question and something I thought about recently as I've decided not to renew the lease with an apparently good tenant of mine.

Location helps, the better the area, the more likelihood you may be able to find good tenants and so the less discount you may have to apply. Also the type of property matters, if it is a standalone property you may have to apply a bigger discount than if it was a small flat yielding the same return.

Also there are insurance products around these days which significantly minimise the cost of having a bad tenant, and thus the need to offer a discount is further reduced.

Frankly good tenants are not worth as much as they used to be because there are quite a bit of them around actually, finding good landlords these days can be a bit tricky.
 
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saturnz said:
Also there are insurance products around these days which significantly minimise the cost of having a bad tenant, and thus the need to offer a discount is further reduced.
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