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It can be a balancing act when it comes to how much rent you decide to charge. Overprice your listing and you’ll send valuable tenants running for the hills. Sell yourself short and your cash flow will struggle.
So, the million-dollar question is: How do you know how much rent to charge?
If you use a property manager, a rental appraisal is the million-dollar answer. But if you have no trust in your agent's abilities, how do you know that they are worth their salt and that they will get you the right rental price?
32% of owners we surveyed said that getting the right rental rate from their property manager was one of their three biggest fears.
At :Different we want you to rest easy knowing the rent you've advertised your property at is the right one. So we decided to give you full transparency in the tools we use and the work that we do to set the rent on your investment property, with some help from our Head of Growth & Leasing, Kasey McDonald.
Our process when we set the rent for your rental property
You might've felt like your property manager in the past was just throwing darts at a price chart with their eyes closed. How did they get that number anyhow? We'll share how we get ours.
Kasey explains that our rental appraisal process boils down into 3 steps:
- Research what similar properties (size, condition, features etc.) have recently been leased for.
- Review current listings to gauge whether similar properties are common or rare in the area.
- Assess market vacancy rates and how many days properties remain on the market to determine how fast properties are leasing in the area.
"Saturation does play a factor in deciding the weekly rent, generally if in a saturated market with many similar properties available it draws the price down. We take these points into consideration when determining the final listing price."
When it comes to appraisals, our accuracy is only as good as the tools at our disposal. Core Logic, SQM Research, REA and Domain reports are just some of the databases that give us the edge on those detailed market insights.
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Updating the rental price throughout the leasing campaign
Our initial analysis is the first step, but we know that the work is not done until your rental property is tenanted.
As Kasey explains, there are a few key performance indicators we monitor before suggesting a price adjustment:
- Online engagement: Prospective tenants’ first point of contact is almost always through online portals. But if they don’t review the listing and register for an inspection, especially within the first week of it being LIVE, then that’s strike one.
- Inquiries and attendance: If the first inspection doesn’t see the level of interest and attendance that we would have expected based on market research, that’s another indicator that a price adjustment may be in order.
- Applicant feedback: Lastly, we consider the feedback we receive from prospective tenants who attend the inspections – a clear cut way of gauging what’s working and what might need some tweaking.
"Tenants who attend the inspections will offer great feedback and this is also taken into account when reviewing the price and presentation of the property with the landlord.”
In the end, our goal is to minimize your vacancy period as much as we can. We know that dropping the rent by a few bucks a week is better for your cash flow if it means you cut your vacancy a week short.
"The longer the property is on the market the less desirable it is to prospective tenants. By listing the property at the price the valuation suggests means you have a higher chance of a reduced vacancy period, therefore, maximizing the return."
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We also take steps to increase the appeal of your investment property
Part of the picture is that we want you to get the maximum returns from your investment property.
Before we go the nine yards to set your rental at the golden price in line with market data, we like to do all we can to bump up the appeal of your property before your rental even touches the Domain listing page.
"It can be things like professional photos, changing the open home times, added a floorplan, ensuring the property is cleaned and presented well (lawns mowed), if it needs a fresh coat of paint and or new carpet we would also suggest this in order for the property to stand out and be competitive."
Getting the right rent is an iterative process, and while everyone makes mistakes, our commitment to monitoring the performance of your rental advertisements along with our focus on increasing the appeal on your investment property will ensure you keep your vacancy rates at a minimum.
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Disclaimer: The views, information, or opinions expressed in this blog post are for general information purposes only and should not be relied upon. We have not taken into account specific situations, facts or circumstances, and no part of this blog post constitutes personal financial, legal, or tax advice to you.