Market value, not landlords’ hopes, should determine rent: McGrath
Property investors are selling themselves short by asking for a lower rent in the hope of securing a longer-term tenant, according to McGrath Estate Agents head of property management Michael Conolly.
Conolly says such a strategy does not usually work and says an experienced property manager is the best way for a property investor to determine what rent to charge tenants.
He says landlords often confused their price expectation with what the local tenant market will bear.
“You might want a certain price for your property based on what you think it’s worth, but the real rental value is based on what the market is willing to pay,” Conolly says.
“We call this ‘market value’, and it’s based on many variables that can change monthly.
“The best way to find out what your property will rent for in today’s market is to talk to an experienced property manager. They are listing and leasing properties daily and have access to data that is not available to people outside the industry,” he explains.
Conolly offers the following strategy for setting the rent: “After seeking advice from a trusted, knowledgeable local expert, always advertise at the maximum rental value at the start of your campaign. You can adjust the asking rent after the first or second round of feedback if you really need to.”
He warns investors against advertising their property at a slightly lower rent to attract a longer-term tenant, saying the strategy sells a property short.
He says due to tight vacancies, most renters will expect regular rental increases and in most cases they’ll continue living in your property when the rent goes up.
“As a general rule, I recommend small, regular increases in rent. Some landlords don't put the rent up for two years and then try and put it up by $50 a week.
“Tenants don't like that. Depending on what the market is doing, I suggest perhaps a $5 to $10 increase in rent every six to 12 months. Just keep the rent ticking over, but not outpacing the market,” he says.
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