Rent Reduction

When should you reduce the rent?

As a savvy property investor, one key factor contributing to your success is maintaining a profitable
rental portfolio. However, there may be circumstances that call for a careful evaluation of the rent
you’re charging and, in some cases, reducing the rent. This article outlines when it may be a good idea
to reduce the rent.

When should you reduce the rent on your investment property?

There are some general rules that can provide you with guidelines on when to reduce the rent.
Generally, you should reduce the rent if:
 Other listings in your area offer more amenities at the same or a lower price.
 Your property has been vacant for several weeks.
 You are getting less than two applications per day.

To keep pace with market conditions

When you’re faced with a decline in demand or an oversupply of rental properties, you may need to
reduce the rent to remain competitive in the market. When it comes time to either offer a lease renewal
to your current tenants or attract new tenants, assess vacancy rates in your area, conduct market
research, and talk to your property manager about whether a rent reduction is warranted.
If you’re having difficulty finding a tenant

If you can’t find a tenant, it may seem counterintuitive to reduce the rent.

However, several weeks of
vacancy can have a bigger impact on your rental income than reducing the rent by $10 to $30 per week.
To reinvigorate interest in your property, talk to your property manager to decide on a reduction
amount, advertise the reduction in the property’s listing title, and schedule new inspection times.

If you want to keep a great tenant

If you have reliable and responsible tenants, a rent reduction may be a viable option during lease
renewal negotiations. A slight reduction can be seen as a gesture of goodwill and reduces the risk of
vacancy and turnover costs.

Property maintenance and upgrades

Reducing the rent temporarily or compensating for major maintenance and repairs can be a fair
approach to maintaining a positive landlord-tenant relationship. Remember, any major capital works
completed while a tenant lives in your property can be claimed as a tax deduction, which could account
for the rental reduction you offer.

Understanding when to reduce the rent is crucial for maintaining a successful and profitable rental
portfolio. By carefully evaluating economic conditions, vacancy rates, tenant relationships, maintenance
requirements, external factors, and competition, you can make informed decisions that balance tenant
satisfaction and long-term financial returns. Remember, maintaining a fair and transparent approach to
rental adjustments is key to maintaining a strong relationship with your tenants while achieving your
long-term wealth-building goals.

Remember, this article is general in nature and is not financial or legal advice. Please consult your
professional financial and legal advisors before making any decisions for yourself.