subject: Setting The Right Rent: Maximising Profits And Avoiding Vacancy Costs [print this page] Setting the right rent for your investment property is extremely important. You need to create a balance between maximising profits and losing money from vacancy costs. This can be a difficult balance to strike for an inexperienced, overwhelmed or uninformed landlord. There are a few key factors that affect the rent of your unit or home:
Desirability
Desirability is not purely based on the number of bedrooms, although that is a good basic indicator. A standard price for a unit with one bedroom means missing out on earning extra money for other factors of desirability such as what floor the unit is on, its storage capacities and any refurbishment. This is particularly pertinent if you own several units in the same block, or homes in close vicinity. It is reasonable to charge more for the property that has extra features, even if in terms of sheer floor space it is the same.
Competition
Your rental property does not exist in a vacuum. Tenants will be looking at a variety of units and homes on the market. An investment property manager can inform you of the price of competitive units on the market, or you can research yourself.
Interest
If you are flooded with responses to your property, the rent is probably set too low. On the other hand, rent that is not in keeping with desirability and competition will mean you receive little to no response. Use tenant interest and enquiries to find the right balance. After all, you do not want to be locking in tenants if the rate is too cheap!
Market Demand
The rent you can charge for your property is based on the market. Rent should be appraised and adjusted fairly regularly in order to maintain constancy with the market. How many prospective tenants exist in your area, in relation to how many properties are on the market for rent, determines the level of rent you can charge. Whilst you want your property to remain accessible to tenants in your market, it is important to not lower rent below property costs, unless doing so will result in long term vacancy.
Profits
At the very least your rent should cover the expenses for the property, including mortgage (if in place), maintenance and repairs and advertising costs. Depending on your goals from the property you should be able to pocket profits as well. This depends on whether you own the property outright, or are looking to make a profit once you sell the property.
