Landlords should understand the rental climate when determining the most suitable price to charge for rent. Supply and demand drives the rental market therefore price adjustments need to be made to accommodate.
Here are a few of my tips to consider when working out the right price to charge for your investment property.
Comparison is key to determining the right rental price. Consider what your property offers in terms of size, presentation and proximity to transport, shops and schools. Comparison can then be made to other properties in your area. Extensive research will be a guiding factor in making the right decision about price.
High vacancy rates in an area may indicate low levels of demand or a high supply level. Remember that in some areas, certain kinds of homes may be more desirable to tenants. For example, people might be looking for townhouses to rent in a particular area over standalone homes. If the kind of property that you are offering is in oversupply, you may have to consider lowering your asking price in order to attract a desirable tenant.
Where vacancy rates are low, opportunity may exist for a price increase. In more exclusive areas renters may be more willing to pay a higher price than average to secure a property. Rental increases may not be the best decision when your property is happily occupied. Maintaining a good relationship with tenants may encourage continued occupancy. Even a simple gesture such as mowing the lawns can influence the satisfaction of your tenants. If you choose to do the mowing yourself, it may even afford you the chance to check in on the property. If the rent is increased in a competitive market, you run the risk that the tenant will leave, resulting in a vacant investment property. The financial loss from this can quickly outweigh any gain from a high rent from the next tenant.