Wednesday, March 09, 2011

Rent review completed

One of my leases expires next week. I have negotiated a 16% increase in rent for a fixed two year term (no break clause). I have also agreed to leave the two months bond at the same amount as the previous lease.

The increase is less than the current market rent (which would suggest a 25% or greater increase), but I have accepted a smaller increase because:

1. the tenant managed to convince me that he would leave (and downsize) if I insisted on anything higher. Even a one month vacancy would be enough to negate the gain of getting to market rates if the agent's commission was taken into account;

2. the absence of a break clause is of value as it defers the risk of a future vacancy by 11 months. The only thing more important than cash flow is a predictable and reliable cash flow;

3. the tenant has been a prompt payer of rent who does not impose on my time. I like tenants like this.

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