Is your investment property’s rent in line with today’s market?

Rent prices have increased a lot in the last 12 months – are you currently getting the correct market rent for your property?

With the drastic changes moving in the market and with median rents climbing over 10% across 2021 (CoreLogic), we believe that now is the right time to maximise the performance of your investment. However, there are still lots to consider when it comes to adjusting your rents. These, of course, include meeting the market conditions and retaining reliable tenants who value and take proper care of your investment property.

Why is keeping good tenants important, you ask? Here, listed down below are the reasons why it pays to keep such reliable tenants:

MINIMISED MAINTENANCE COSTS

Having a good tenant, especially the one that looks after your property, will help reduce ongoing maintenance and repair costs in your property. It will also reduce the likelihood of damage to  your investment, which will eventually contribute to the preservation of the overall value of your property and healthier long-term investment returns.

CONSERVATION OF CAPITAL EXPENDITURE

If you have a long-term tenant, the chances are that your property may be in need of a few upgrades on changeover of tenants. So, if it’s been some time since you last leased your property, it is crucial that you consider making any additions or improvements to re-align your property to the current market demands before advertising to new tenants.

This means you may have to outlay some capital to have the additional features needed, and you may also need to take into consideration the time your property might be vacant before you can onboard new tenants.

AVOIDANCE OF LETTING COSTS

When your property is vacant, another thing you need to consider is the potential income you may lose along the way. This also includes all the costs associated with re-letting your property.

Moreover, if you have a property manager managing your property, you also need to factor in his/her letting fees, which are often equivalent to one to two weeks of rent. Aside from that, there are also required marketing costs to help promote your property (e.g. photography and advertising).

All of these steps will cost you money directly from your pocket, which is why getting a higher rental income is something you should aim for. Again, it is crucial that you understand how much these initial costs can eat into your extra returns, so make sure that you are prepared to make intelligent decisions.

Now that we’re done with the significance of keeping good tenants, let’s proceed with how raising the rents can make the best of both worlds?

Although it’s beneficial that you keep current tenants, it doesn’t mean you need to miss out on increased rent altogether. A great property manager will be able to work with your tenants and, at the same time, come up with solutions that are advantageous to both parties.

An example of a good practice is to incorporate rental increase causes into lease agreements, which allows rental increases after six months, instead of dramatically increasing the asking rental price upfront. With this, both the landlord and the tenant will benefit while your property is also kept in line with the changing market conditions.

To elaborate, landlords will benefit from the increased rental returns while keeping up with the current rental conditions, whereas tenants will be able to stay in a property they are happy with while having time to prepare for the increase in rental payments.

If you are a landlord and you need help on how to adjust your rental strategies, you may always reach out to us to discuss recent trends in the market. Contact us for more information.