The Rent Review Question Victorian Landlords Are Getting Wrong

When a tenancy comes up for review, the instinct for many investors is straightforward: find out what the market is paying and push for it. Maximum rent, maximum return.

It is a perfectly reasonable instinct. But in Victoria, it misses something important, and getting it wrong can cost you considerably more than the extra rent you were chasing.

The Victorian context most landlords underestimate

Victoria has some of the most tenant-protective rental legislation in the country. Since the 2021 reforms, the grounds on which a landlord can end a tenancy are narrow and strictly defined. You cannot end a periodic tenancy simply because you want a new tenant, want to test the market or think you could get more rent elsewhere.

In practice, this means that if you have a difficult tenancy, persistent arrears, property damage, lease breaches, ending it is a slow, evidence-dependent process through the Victorian Civil and Administrative Tribunal. It is manageable, but it takes time, documentation and often legal support.

The inverse is equally true and equally important: if you have a good tenancy, it is worth considerably more than most landlords give it credit for.

What a good tenancy is actually worth

A good tenant, one who pays on time, cares for the property, communicates reasonably and respects the terms of the lease is not just convenient. In the Victorian legislative environment, they represent a form of certainty that is genuinely difficult to replace once lost.

Consider what you have with a proven tenancy:

• A known payment history, not a prediction based on a reference check 

• A property being maintained by someone who has demonstrated they will look after it

• No vacancy period, no reletting costs, no uncertainty about who comes next
• No VCAT risk if something goes wrong with a new tenant who turns out to be less straightforward than their application suggested 

The cost of losing a good tenant is rarely calculated in full. Lost rent during vacancy, advertising, reletting fees, cleaning and maintenance between tenancies, and the time your property manager spends processing a new tenancy on a $600 per week property, a four-week vacancy alone costs $2,400 before a single additional expense is factored in.

The case for pricing just below the absolute top of the market

Here is the question worth sitting with: if the market rent for your property is $620 per week and your tenant is currently paying $570, is the right move to go straight to $620?

Maybe. But not always.

A rent increase to $600, $20 below the absolute market ceiling still improves your yield by $1,560 per year. It is a meaningful improvement. And it may be the difference between a tenant who accepts the increase and stays, and one who decides to test the market themselves and finds something comparable at $610.

The $20 per week you left on the table costs you $1,040 per year. A four-week vacancy costs you $2,400. The maths is not complicated.

This is not an argument for leaving rent below market indefinitely. Rents that fall materially behind the market compound over time and become harder to recover without triggering exactly the outcome you were trying to avoid. The point is that the right rent is not always the highest rent, it is the rent that optimises your total return, accounting for the real cost of vacancy and the value of the tenancy you already have.

How to think about the rent review conversation

Under Victorian law, rent can only be increased once every 12 months, and tenants must be given 60 days’ written notice of any increase. That structure gives both parties time to consider their position, which is exactly how the rent review conversation should be approached.

A well-handled rent review:

• Is based on real comparable data, not a general sense that rents have gone up

• Positions the increase relative to the market clearly and respectfully

• Gives the tenant enough time to make a considered decision rather than a reactive one

• Is managed by your property manager, including negotiations in some cases

Good tenants understand that rents move with the market. A rent review framed with clear evidence and reasonable notice is usually accepted. One that feels arbitrary, excessive or poorly communicated is the one that triggers a notice to vacate.

When pushing to the top of the market is the right call

There are times when aiming for the full market rent makes sense, even if it means risking a short period of vacancy.

This is often the case when a property is significantly under market and the gap between the current rent and market value has grown to the point where a reset is worthwhile.

The question to ask at review time

Not: What is the maximum rent I can achieve?

But: what is the rent that gives me the best total return accounting for the value of this tenancy, the real cost of vacancy, and the legislative reality of ending a tenancy in Victoria if the next one goes wrong?

In most cases, a good tenant on a rent that is at or close to market is worth more than a speculative push for the absolute ceiling. The certainty has value. In Victoria more than most states, that certainty is worth pricing in.

Talk to your property manager before you decide

Your property manager has the comparable rental data, the tenancy history and the local market knowledge to help you make this call clearly. If a rent review is coming up, they should be bringing this conversation to you, not waiting for you to ask.

If you are a LongView client, your property manager will reach out well ahead of your next lease review. If you are not yet with LongView and want an honest view of what your property should be earning and whether your current rent is where it needs to be, we offer free rental appraisals with no obligation.