Rent increase versus tenant retention for a studio in Sydney?

R

ravi_james

Property investor
Getting this wrong could mean either losing a dependable tenant for little extra income or allowing the rent to drift too far behind the market. The Sydney studio currently brings in about A$11,860, while the closest advertised examples are around A$13,240. The tenant pays on time and has looked after the place well.

I am leaning towards a modest increase rather than the full gap, but I want to test that properly. How would you weigh achieved market rent, the studio’s maintenance history, vacancy and any work needed between tenancies? I also want future reviews to follow a repeatable process, including correct notice and deposit handling, rather than depending on instinct.
 
Matching the advertised figure is tempting, but retaining this tenant may be worth more than closing the whole gap. Listings show what landlords hope to receive, whereas even a brief vacancy, preparation work and reletting costs are real losses.

I would narrow the evidence to studios with similar condition, furnishing and lease terms, then compare a moderate increase with a realistic turnover scenario. That gives some recognition to the market without assuming A$13,240 is immediately achievable.
 
How long would reletting realistically take, and is any maintenance likely before a new tenant could move in? Those two figures matter more than the headline market comparison. Also check whether the A$13,240 examples match the studio’s condition, furnishing, location and lease terms rather than just its size.
 
If I focus only on the A$1,380 difference, I could gain it on paper and lose it through one turnover. I had not given enough weight to vacancy, preparation work or the value of this tenant’s payment and maintenance record.

My next step is to remove optimistic listings from the comparison and price a few reletting scenarios. I can then judge whether a smaller regular adjustment leaves a better margin than either holding at A$11,860 or moving straight towards A$13,240.
 
A useful repeatable method is: confirm the current NSW notice and timing requirements, gather a small set of close comparables, adjust for meaningful differences, record the tenant’s payment and maintenance history, and model retention against turnover. Then choose a figure you could explain calmly to the tenant. Keep the legal timing decision separate from the commercial one.
 
Leaving the rent untouched can also create a problem: the eventual correction may become too large for an otherwise good tenancy. Reliable payment and careful use should influence the amount, but they do not necessarily justify skipping every review.

A small, explainable adjustment sounds attractive here. I would change that view if the studio’s older fixtures or maintenance history showed that the A$13,240 comparisons were materially better properties.
 
Agreed about avoiding a large future jump, but there is also no need to reach market level in one step. The sensible comparison is the extra rent actually collected versus the expected cost of losing this particular tenant. Use more than one vacancy scenario, because a single optimistic estimate can make a bigger increase look safer than it is.
 
Before deciding, inspect or otherwise confirm the studio’s present condition through the normal tenancy process. The tenant may be caring for it well while older fixtures still limit what a new applicant would pay. Market listings that have recently been refurbished are weak comparisons if this studio has not been.
 
That connects to the refurbishment point. If work will be needed eventually, retention may defer both the expense and the vacancy, but it does not make them disappear. I would model two paths: keep the tenant with a modest increase, or relet after works. Include the rent lost while arranging those works, not just the invoices.
 
One caution: do not present the comparables as proof that the tenant must accept a particular figure. They support the landlord’s reasoning, but condition and timing can differ. A short, respectful explanation—current rent, proposed rent, effective date and required notice—will usually preserve the relationship better than a long argument about listings.
 
Would you also consider the tenant’s likely response before setting the amount? Not by asking what they can afford, but by deciding in advance what happens if they say the increase makes the studio unaffordable. Knowing whether you would negotiate, hold firm or accept notice prevents an improvised and inconsistent response.
 
For consistency, use the same worksheet at every review: current rent, comparable range, property differences, payment history, maintenance burden, likely vacancy, preparation costs and the proposed adjustment. Add the applicable notice deadline and retain the supporting dates. It will not produce a perfect answer, but it makes clear why two apparently similar tenancies might justify different outcomes.
 
I would not include the deposit as money available to cover ordinary turnover. Handle it separately under the applicable tenancy process and base any claim on the actual condition and obligations at the end. For the rent decision, budget conservatively as though routine cleaning, advertising, vacancy and improvements remain the owner’s turnover costs.
 
There is another middle course: set a modest increase below the apparent market figure and state the next review approach without promising a future amount. That gives the tenant clarity while preserving flexibility if comparable rents or the studio’s condition change. Just confirm the current NSW rules on frequency, notice and effective dates before communicating anything.
 
My vote is for a moderate, well-supported adjustment rather than either extreme. The tenant’s record reduces risk, while the A$1,380 gap shows why ignoring reviews indefinitely is unhelpful. Run the vacancy and refurbishment scenarios first; if the extra rent takes a long time to recover one turnover, retaining a reliable tenant below asking rent can still be the stronger financial result.
 
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