How Do You Determine the Best Rent For Your Property?
Every investor should be striving to get the maximum rent possible for their property; so why not just pick the rent you want to achieve and advertise it at that? That may seem the simple approach but it’s certainly not the most effective and is likely to actually reduce your overall rental income rather than increase it.
Yes it is important that you strive to get the maximum rent possible, however you also must keep in mind setting the correct market rent to get your property rented as soon as possible; the longer you have a property vacant, the more it’s going to cost you. As an investor you no doubt realise that time is money!
So how do you get the highest rent in the shortest time? Well I believe there are 3 factors to consider:
- Demand– Is there a high or low demand for properties at present. are there lost of adverts which have been there consistently, or do real estate agents appear to have many properties available. This can be seasonal and affected by a number of factors. If there’s high demand you are more likely to get a higher rent. If there’s low demand you could be competing with other landlords.
- What Is Available Now– look at properties currently available for rent in the newspaper and/or the internet, and consider their location and features for comparison to yours. Have they been on the market for a while? Are they asking too high a rent? Are they lacking in facilities that you can focus on when marketing your own property?
- What Is Rented Right Now– Compare your property with what is currently rented, taking into account property location and features. Find out by asking other local property investors or your property manager. This will give you an indication of what type of property rents more easily at what price.
These 3 key factors should give you enough information to set the right rent for your property to get your income flowing quickly.
What if I want a rent amount that is higher?
As I mentioned at the beginning of this article, you could potentially just advertise the high rental that you want to charge – you can of course place your property on the market at any rental amount you wish.
However, after reading the 3 key factors above I hope you understand that it is the market demand that sets the rent and if the market (prospective tenants looking for a rental property) deem the amount of rent too high; your property may stay vacant longer than necessary.
With this in mind, be aware your annual rental return will be reduced by 2% for every week it is vacant!
If you want to charge high than market rent, and you also want to get a tenant quickly, you need to be providing something that the other landlords are not, which is important or attractive enough to the prospective tenant for them to pay a higher rental amount.
How should the rent be reviewed?
Everything comes in 3’s and this is no exception!
- The ideal opportunity to review the rent is when you are looking to secure a new tenant, but always review the rent against market conditions as mentioned above.
- Lease renewal time is a great time to review the rent, but again, make sure you’ve done your homework if you’re self managing.
- Negotiating with a periodic tenant to make some improvements to the property or offer benefits to them allowing you the opportuhi8ty to review the rent, at the same time. You may even want to negotiate to change them to a fixed term lease at the same time, too.
It should be noted here also that there may be some legal limitations which apply to when you can increase the rent in your area so make sure if you self manage you have done your research on those requirements. If your property is being managed the property manager should contact you for your permission before the rent is increased.
As property managers working in the market day to day it’s easy for us to keep up to date with the market and the local legislations relating to rental properties, but if you’re self managing it may be something you only do occasionally, so keep these notes ready for your next opportunity to review your rent and make the most of your investment!
This article has been supplied by Ros Hurn, Principal at Real Tenants, Real Property Management www.realtenants.com.au Real Tenants is dedicated to providing its clients with the highest possible quality of service and standards, seeking to deliver on their promise of reliability and quality above all else.