Be realistic when it comes to rent
Setting the rent of an investment property is about finding a balance between competition, supply and vacancy rates, according to property experts.
Propell National Valuers property adviser Will Hosking said the best start was to get rental appraisals from more than one property-management firm.
“When you receive the rental appraisal, it is a good exercise to go online and search for rental properties with comparable improvements (bedrooms, bathrooms, parking etc) in the suburb that you own your property to see how many other comparable properties are currently listed and at what price, ” Mr Hosking said.
“This will very quickly give you a good feel for whether or not the appraisal is realistic or too high or low for what the market is willing to pay.”
LJ Hooker Leeming licensee and head of property management Pauline Francis said landlords should check if their suburb had a high rental vacancy rate, which she said equated to anything below 2 per cent, and adjust their rent accordingly.
“After all, lowering your rent by $10 to $15 may allow you to stand out from other properties and secure a tenant, reducing the risk of a period of vacancy and lost rent, ” Ms Francis said.
However, Mr Hosking warned landlords not to get too caught up in trying to achieve a few extra dollars each week.
“If a property is rented for $500 a week and the landlord looks to increase the rent to $520 a week (above what the market is willing to pay) it only takes two weeks worth of vacancy and the difference will be lost over the course of a year, ” he said.
Mr Hosking said just because a great return was achieved one year, it did not necessarily mean that rental figure could be achieved again if that market changed when the property came up for lease.
“In this instance, be willing to reduce your rent slightly to make sure you minimise the vacancy, and often during this period of a cycle the market will be entering into a growth phase so it can often be good news from a value standpoint, ” he said.
Hegney Property Group director Gavin Hegney said investors who bought a tenanted property should check the set rent with that of the market rate.
“This is particularly important if the actual rent was set in a stronger rental market at a level which might not be achievable in today’s market, ” he said.
“Just because interest rates or costs go up or down, it doesn’t necessarily reflect in a commensurate change in the rent; rental movements are very much about vacancy rates and supply and demand at the time of vacancy.”
© The West Australian