Why rent didn't move for years, then jumped $120 a week overnight
One property in my portfolio has had years where rent barely moved. This year it went up $120 a week in one step, and I could have pushed for more.
As a buyers agent managing an active property portfolio alongside client purchases, I test the assumptions I use with clients against what actually plays out on my own numbers. This is one of those tests.
Rent on this property moved from $380 a week in 2018 to $390 in 2021, while vacancy in the area tightened from 6% to 1%.
Same tenant since 2021. Last year's review suggested a $20 increase. I passed on it, didn't see the point. This year the review supported $120, and I took it.
That wasn't even the ceiling. My property manager noted that if the tenant vacated, we could have gone to market at $150 to $160 for someone new. I checked that myself by running my own comparables before deciding. So it's not just one person's read on the market, and it lines up: there was more room than I used.
I didn't take it. A longer vacancy, re-letting costs, and the chance of ending up with a worse tenant weren't worth the extra $30 to $40 a week to me. That's not the market being generous. That's choosing a known tenant over squeezing the number as far as it'll go.
We model rental growth conservatively, around 4% a year. It's not a number we expect every single year to hit. Some years blow well past it, some years land under it. It's a low end assumption meant to hold up over a long period, not a target for any one review.
People tend to picture rental growth like compound interest. A steady percentage, year after year. That's not how it actually moves.