It is easy enough to set rent, but experts strongly recommend to seek help from property professionals in order to keep a good cash flow and serviceability throughout their journey.
One of the best ways to set the right rental price is by checking comparable properties in the market. A real estate property manager can do this for you but be ready for the hard sell of the agent trying to win the management listing by offering low fees and providing a high expectation. You can also get appraisal online but you should know that you are giving free property and personal information that can be sold to marketing firms.
Also, the rental prices will also depend on the present supply level and demand in the area.
Mistakes to avoid when determining rent
- Automatic rent increase
Rental price should always in sync with the state of the market. But with that being said, owners must avoid the tendency to take the current rent and raising it by a certain percentage without evaluating the present market, particularly if the property experienced a prolonged vacancy or a long-time renter has moved out. Smart investors are up to date with the present status of the dynamic property market.
- Saying no to decreasing rent
Smart investors will not say no about cutting rent if the market demands it. A lot of the times, a shortage in tenant application is due to the fact that the rent could be higher than what the market dictates.
Rejecting a cut in rent may negatively affect the portfolio as the harm in a prolonged vacancy will probably be bigger than just removing a couple of bucks worth of weekly rent. Each week an owner refuses to implement the desired rent is a direct and costly blow to the return on investments.
- Comparing apples and oranges
When checking out comparable properties to determine the right weekly rent, I advise investors to look at homes in the same area and with the same features, including the number of bathrooms, bedrooms and car spaces, how old the property is and nearby facilities.
- Using rent to recoup expenses
It is not true that determining rent is an economic decision. It is a mathematical one. You shouldn’t use the monthly cost of your property investment as the basis for setting rent. There is no use putting the rent at $450 per week just because it’s the amount required to pay the loan.
Tenants don’t think about that when making the decision to apply for your property. The truth is, they do not care.
Try considering “The tenant frame of mind”. I seriously urge property investors to put themselves in the tenant’s shoes rather than the landlords. What is essential in determining an accurate rent is to check the present market, utilise free online tools out there, and begin with an expansive search of comparable homes prior to limiting it to specifics.
My final advice to investors is: Heed the market when the home is advertised and react quickly to what it is telling you.
Remember, you can always change your property manager if you are unsatisfied with their services and you don’t need to wait until your tenant moves out or their lease ends. It can be done at anytime! This is your investment and your business!
Contact us at One Agency Pinkerton Properties if you would like to know how we can best serve you!