With rental prices rising, you may be wondering whether you’re still charging the right amount and if you should change this when the time comes. While the market has experienced significant growth in recent months, opting for a hefty price increase without doing your research can be risky. First, it may take longer to find a great tenant if your property is currently vacant. And second, if your tenants are coming to the end of their fixed-term agreement, offering them a new agreement with an above-market increase could prompt them to look for another property. Like many things in property pricing, getting the balance right is key. Keep reading to understand how to decide what you should charge.
Focus on the market to make your own estimate
Strong rental price growth is great for investors, but it can be stressful for renters. Hiking your rent price too much can cause great tenants to find another property. To get an idea of how much you can reasonably charge for rent, list everything your property has to offer. This includes the number of bedrooms, location, bathrooms, car spaces, and other amenities such as separate laundry, air conditioning, and outdoor space.
From here, look at the location. What does the area offer to potential tenants? Think about cafes, walkability, local schools, and proximity to the CBD and other employment hubs. After considering local amenities, use property search websites to compare similar properties in the area. Once you know how much comparable properties are renting for, add other expenses such as electricity, water bills, and internet, if applicable. With all your property details and research gathered, you should be able to estimate what you can charge.
Talk to your property manager
Your property manager works closely with the market each day, so they know exactly how much properties are renting for and what you may be able to charge in the current market. If you’ve worked through the steps above to come to your estimate, talking to a trusted professional to make sure it’s accurate is critical. They’ll be able to guide you on the exact price to charge, to secure a great new tenant or keep the great tenants currently living at your property.
Think long term
Your property manager can also help you negotiate more detailed particulars, such as a long-term lease. Some potential tenants may be looking to sign longer leases than the standard six or 12 months. In these cases, your property manager can work with you to determine how much to charge. While you may be worried about missing bi-annual or annual rent increases, securing a longer-term tenant could provide more stability and increase your chances of finding a tenant who will take exceptional care of your home.
It can be tempting to make significant increases to what you charge in a tight rental market. While this can put more money in your pocket, making the wrong decision about what to charge can deter great tenants or prompt your current tenants to move out. Before you decide to change how much rent you charge, do your research, and talk to your property manager, who can help you make sure what you’re charging is fair. Not only will this reduce your risk of vacancy, but it will ensure you get the best long-term returns.