Are you a successful gambler? Deciding on the right rent to charge for your rental property might be one of the most pivotal decisions you will take as a rental property owner. Rental income is at the core of your short term ROI. And spinning the numbers wheel to find a random figure is unlikely to bring good results. Experienced property management specialists like Baxton in Hobart have found the key to determining the best rent to charge, but if you go it alone, there are a number of factors to consider.
You wouldn’t be renting out your property if it weren’t for wanting the highest rental income you can get, right? So it’s obvious the best rent to charge matches (or just tops) the market value in your area. Or is it? This is just the first of many gambles you will have to take in deciding on a final figure, and one you really need to have pay off if you want to make your rental work for you.
Should you go with the market value?
Are you feeling lucky? Choosing market value or even going slightly higher, could be the right decision. It might bring in top calibre tenants, particularly if your rental property and its location make them see renting it as worth it. But there’s no guarantee that will happen, particularly in a low vacancy rental rate area like Hobart in Tasmania.
You will definitely find a queue of prospective tenants on viewing day in a town that’s undergoing a boom, but that queue could be filled with people who are purely desperate for accommodation and prepared to stretch their budgets for as long as they can keep a roof over their heads by doing so. It might be plain sailing for awhile – at least until their cash reserves run out, and their first rent payment doesn’t arrive on time. Or they could have no intention of staying there, and be scanning the properties-to-let ads before the ink is dry on the lease they have just signed with you.
Cutting the costs on both sides
Lease breaking and unpaid rent are not the only considerations. There’s the problem of getting replacement tenants who do not have the same agenda, and who really want to live there. And there are costs and time involved in going through the process of advertising your rental and going through the selection process all over again, while losing rental income at the same time because your property is standing vacant.
Good tenants are those that want to find a home, not just temporary accommodation. Charging a rent that is marginally lower than market value might sound more than a touch insane, but it might pay off in the long run. You could earn long-term loyalty from your tenant, as well as encouraging them to keep the premises clean and undamaged, because they have no intention of leaving any time soon. And most of all, it could cut down on vacancies. A vacant property takes 8.3 percent off the top of your annual rental income for every month it stands empty. Suddenly a slight drop in the rent doesn’t seem so crazy.
Adjusting the rent
Another gamble that may pay off is to adjust the rent once you know that the tenant has decided to stay for a longer term, perhaps lifting it back to the market level. From your side, they have been good tenants who have looked after the property, and, above all, have paid their rent on time. And, from their perspective, they like the property, are comfortable there, and are not in a hurry to move, especially as moving isn’t cheap. And both you and your tenant know they are not going to find a rental that’s a better deal in a hurry.
Don’t raise the rent too much or too often
You don’t have a choice in Tasmania about how often you can raise the rent. Since October 1, 2015, rents there can only be raised every 12 months. Tenants must be notified in writing 60 days beforehand of both the amount of the new rent and the day from which it applies. Australia’s island state also makes it clear that rent can only be increased if the relevant tenancy agreement is not in writing, or if it is written, the agreement must allow for rent increases.
Deciding on the rent to charge tenants can be one of the most difficult aspects of managing your rental property. The next in line is collecting it. Specialist property managers know how to handle both through years of experience. Baxton Property Management in Hobart is one of Tasmania’s top specialists in this sector, and they see it as part and parcel of their operation to make information available to investment property owners through their website blog.
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– Baxton Media.
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