7 Tips For Increasing Your Rent
Most investment properties are under rented. How can we make such a bold statement? Because probably 9 out of 10 investment properties we look at buying for clients are being rented for at least 10% below market value, often more.
Of course there are a number of potentially valid reasons for it, such as a friend or family as the tenant, or the tenant is reliable or long term, however, rarely does this excuse forgive the low rent. Owning and renting investment property should essentially be treated as a business, so maximum rent should be achieved from the property at all times.
Here are 7 tips for increasing your rent.
1. Employ an Appropriate Manager
An appropriate manager in our opinion is someone with a number of years of experience in the industry, owns investment property themselves and is local to the area. Because of these attributes they know your market intimately, they will manage your property better and they understand what it is that property investors require from their manager.
2. Never have your property vacant in November or December
No one likes to move house in the lead up to Christmas. December is the slowest rental period of the year, so you never allow your property to become vacant at this time. There are less people looking at this time so you will either end up getting someone in at a reduced rent or have a lengthy vacancy period. Prevention is the best cure. If you have a new tenant moving in and a 6 month lease would result in their lease expiring in mid December, change it. Make it a 7 month lease. For some reason both owners and property managers unnecessarily stick to 6 and 12 month lease periods. It doesn't have to be this way.
3. Allow Pets
Pet ownership is very high in Australia, one of the highest in the world, and yet there is a reluctance by landlords to allow pets on their properties. We don't quite understand why. There are clauses and rules in place requiring tenants to maintain your property. This includes damage caused by their pets. Negotiate extra terms if necessary, such as a requirement for 6 monthly carpet cleaning, flea treatment, maybe a clause banning pets from being allowed inside or even a clause allowing only certain types and sizes of pets. If you allow pets not only are you opening up your property to a larger number of prospective tenants who are willing to pay more to rent your property, but we also find they tend to stay longer. Why? Because it is difficult for them to find another place to rent!
4. Provide Security
It's sad, but these days a lack of adequate security is a big turn off for a lot of tenants, especially when you consider more and more people are living either on their own or in group households, so security not just to the front door but to most accessible windows and doors are considered very important these days. As a result you can usually rent your property out for more and in quicker time.
5. Keep The Rent Up
The number of people who don't increase their rent because they have great tenants is astounding. Property investing is a business - keep your rent up! Here's an example of how it could affect you. $30 per week under market value is only $1560 per year. Still that is $1560 we would prefer you had in your own pocket. But then consider how this may affect your value. If the average rental yield in your area is 5%, then $30 per week under market in rent equates to a valuation that will come in $31,000 lower than it should, especially in locations or property types where rental yield dictates values more so than surrounding sales, such as in mining areas and/or whole blocks of flats.
Obvious, especially for anyone who follows us, however, it isn't obvious to all. In addition, renovations can be for multiple purposes. The renovations to your own home, for example, might be very different to the renovations that take place on a rental property. Renovate for the target market. Also, don't forget to keep the renovations and maintenance up! You may renovate once, but in another 5 or 10 years you may need to readdress the same property, renovate it to be more modern and possibly readjust your thinking if the target market has changed.
7. Take Charge!
Lastly, take charge! It is your investment, not your property manager's. Don't allow owning a rental property to become automated. So when a lease comes due, don't just tick the box on the letter you receive from your property manager that says 'yes please re-sign my tenant at the current rent' or 'yes, please increase the rent by $10pw'. Every time you receive this letter should be a call to action to research market rents and to get a feel for what the property is worth. Sure, your property manager should be doing this, but are they??? Also carry out regular inspections, at least once every 12 months, to check on maintenance items. Again, your property manager should be doing this, but are they??? In a lot of cases no. How many times have you had a tenant for a few years and no need to carry out maintenance, but once they leave and a thorough inspection is carried out you are asked to fix 10 things?
Remember, owning investment property is a business. Treat it as such!
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