Many benefits come with renewing your tenancy and remaining in your current property for a further 6 or 12 months. Of course, what you probably don’t want to be faced with when you renew your lease is a rent rise. Given there are rules and legislation around how much your rent can increase, you won’t be hit with an astronomical rise. A rent increase, however, may still require you to do some more careful budgeting. Here are our top tips for handling a rent increase.
Know what to expect
In most rental markets, it’s normal to have a rent increase every year or two. So, make sure you put a reminder in your calendar when your tenancy is due for renewal. If your rent is increased, it will likely increase at the standard rate of 3 to 5 per cent.
Don’t stretch yourself
When you’re initially searching for a rental property, make sure the weekly rent doesn’t stretch your budget too far. Most property managers will factor this in with the 30% rule. This means, in most cases, when you apply for a property the weekly rent shouldn’t be more than 30% of your net income.
Pay yourself first
Paying yourself first is a foundational principle to building wealth, and it’s been covered in books such as Rich Dad Poor Dad. When you’re in the habit of paying yourself first by prioritising saving over spending, you’ll have a healthy cash buffer to cover unexpected expenses. If you don’t already have a cash buffer saved, aim to work towards saving at least 3 months of living expenses before you work your way up to 6 and then 12 months. With this level of cash buffer, you’re well and truly prepared for any unexpected life changes or expenses.
Speak to your property manager or landlord
If you want to try negotiating your rent increase, you could try speaking with your property manager or landlord to see if they are flexible on the increased amount. As you’re doing this, try to remember where your property manager or landlord is coming from in increasing the rent. Increasing your rent by around 3 to 5 per cent covers inflation and market growth.
Do the maths
If your rent increase is going ahead, do the maths. While you may initially be unhappy with a rent increase and feel tempted to move to a place that is the same price or slightly cheaper than your current home, the cost of moving may outweigh the rent increase. For example, weigh up costs such as a removalist, the time spent finding and applying for a new property and any changes you may need to make to your furniture and appliances as a result of moving. Once you’ve done the maths, you may find it’s more financially viable to stay in your current property.
Rent increases are one of the downsides of renting. With some careful budgeting and a balanced approached when a rent increase is proposed, you can navigate this time stress-free.