How much rent should you charge?
Category Landlord Advice
Those looking to let out their property often have difficulty determining an accurate and fair rental price. There are many factors to consider and if you don't assess your property value correctly, you could end up overcharging or undercharging and neither are a situation you want to be in. Here are the most important factors to consider when pricing your rental property.
Factors to consider when pricing your rental property
The accepted calculation standard for a long time has been to charge up to 1.1% of the property's value in relative terms. Take note that as the property's value increases the percentage of rental yield decreases because of the low demand for rental in high value properties. In some cases, rental price go as low as the .7% mark. But there are several factors that influence the rent you can charge.
Location
Suburb, sea views, amenities, schools, business districts, and transport routes all play a major part in the demand for a rental property and often we will see homes of equal value and characteristics several kilometres apart charging completely different rental prices due to their location factors. Developments in the neighbourhood can also influence rental increases. A new shopping centre or school can make the area more desirable for families or workers. Another key variable is supply and demand of property in the area and depending on the current trend this will have a definite effect on your rental price.
Other rentals in the area
Once you've assessed the advantageous features of your property you need to research property comparisons in your area to get an idea of what the local standards are. Browse listings of estate agents or property portals and locate properties of similar value and features. In addition, give your local RentalsDotcom agent a call. They'll be able to assist you and give you a great idea of what rental income you can expect. Consider every little detail.
Condition of the property
Internal factors need to be assessed, such as the general condition of your property. In this instance, you need to be very honest with yourself and identify any issues a tenant might have, such as cracks in the wall, paint peeling, cupboard space, kitchen size etc. You must view your property through the eyes of somebody wanting to walk in and call it home.
Affordability
Calculate your bond repayments, levies and other expenses and compare them to a realistic rental income, this way you can determine what you can afford as well as decide whether you should let the tenant pay for water and electricity or if you're able to absorb some of the costs to make the property more appealing on the market. The Consumer Price Index, which measures how consumers will be affected by inflation must also be considered when determining your rental fee or increase. You need to balance the affordability of your tenants in high-inflation years, own profitability.
Market response
Once you've evaluated all these guidelines and determined a price, gauge the ad response and demand for the property to assess whether your rental expectations are too high or too low. Demand is a great indicator of your property's value as many tenants are knowledgeable of what realistic rent prices are. If the ad response is very bad, and you've ticked all the necessary marketing boxes, then maybe you've overestimated the rental price. Reassess and adjust your rental expectation slightly lower and then see what the response is. If on the other hand you get a huge response and are inundated with enquiries, you can afford to push the price a little higher.
Besides the obvious number of bedrooms and bathrooms and general condition of the property, here are some other criteria to consider when pricing your rental:
- Suburb safety and location
- Amenities in the area
- Kitchens and bathrooms that are modern
- Balcony or an outdoor space
- Cupboard space
- Number of parking spaces
- Views
- Plumbing for washing machine / dishwasher
In conclusion, all of these guidelines are only a drop in the ocean in comparison to the knowledge worthy estate agents have and it is undoubtedly still the best option to find a local Harcourts agent to assist you in managing your property. They will not only accurately measure your rental income but ensure all the legalities are followed and tenants are managed professionally and lawfully, as well as handle collection of finances, liaise with tenants on any issues, and ensure the property is maintained and that your most valued investment is looked after correctly.
If you are really serious about doing things right as a landlord, make sure you check out our article on why you need a property manager.
Author: RentalsDotCom
