Can a landlord truly ‘keep the peace’ while still running a business?
A recent discussion in a Facebook group brought up a topic every rental property owner faces: how to handle rent increases.
In this case, a landlord and her partner were unsure about how to approach a rent review for their investment property. Their tenants have been fabulous—tidy, responsible, and proactive with minor maintenance tasks—yet their current rent is about $30 under the current market rent.
The partner was advocating for a $20 weekly increase to stay consistent with past rent adjustments and sound investment logic. The wife, however, felt a $10 increase would better acknowledge the tenants’ contributions and maintain goodwill. As they debated, they turned to the wisdom of a Facebook group for advice.
The Investment Property Dilemma
Investment properties are, by nature, a business asset. However, unlike stocks or shares, they involve a deeply human element: tenants. Striking the right balance between maximising returns and appreciating tenant value can be tricky.
Here’s a breakdown of the key considerations:
1. The Value of Good Tenants
Good tenants are worth their weight in gold and some. They pay rent on time, care for the property, and reduce the stress and costs associated with owning a rental property. As one commenter pointed out, keeping excellent tenants can save you from the expenses of vacancies, advertising, and the dreaded “bad tenant” scenario.
In dollar terms, a vacancy of just three weeks could wipe out the additional $20 weekly increase for the entire year. Add to that the potential costs of repairs, time spent screening applicants, and uncertainty with new tenants, and the picture becomes clear: maintaining great tenants is a strategic investment.
2. Market Rent vs. Relationship Rent
While keeping rent at or slightly below market value is sound financial practice, there’s room for nuance. Some experienced investors recommend a modest discount—$10 to $15 under market—when you have tenants who treat the property like their home. This “relationship rent” reflects the intangible savings they provide.
But it’s also important not to fall too far behind market rent. If rents become underpriced for too long, catching up can result in sharp increases that alienate tenants or risk losing them altogether.
3. Compromise: The Sweet Spot
For this couple, the middle ground may lie in a $15 increase. It’s a balanced approach that acknowledges the tenants’ contributions while keeping the property closer to market rates. Communicating this increase with appreciation for the tenants’ reliability can go a long way in preserving goodwill.
Tips for a Smooth Rent Review
- Do your research: Before making any decisions the current market rents. Markets can fluctuate depending on time of year and the economy so check on Trade Me to see what similar properties are currently renting for, also check Tenancy Services – market rent which is a tool that reports on bonds that have been lodged over a six month period.
- Communicate well in advance: It’s usually worth speaking with your tenants in advance and giving them plenty of notice about the rent increase. Highlight their value as tenants and frame the adjustment as necessary to keep up with costs.
- Weigh Short-Term vs. Long-Term Gains: A modest rent increase might seem like leaving money on the table, but it could pay off in tenant retention and lower turnover costs.
The Bigger Picture
Ultimately, there’s no one-size-fits-all answer to rent reviews. Each decision comes down to your financial goals, tenant relationships, and market dynamics.
For this landlord, the advice from the community was clear: prioritise the bigger picture over short-term gains. A small compromise today could ensure years of hassle-free tenancy.
If you’re a landlord weighing up a similar decision, remember: good tenants are not just renters—they’re partners in maintaining your investment. Balancing financial returns with tenant appreciation is more art than science, but with thoughtful consideration, you can create a win-win scenario for everyone involved.
What’s your approach to rent increases? Share your insights or experiences in the comments below.
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