Establishing a value for anything is about supply and demand and a comparison to what is available and the desire of someone to rent or buy it.
Valuing a rental property is exactly the same. In determining the worth of a rental property we conduct a CMA (Comparative Market Analysis). We will research what properties are available in the local market via Internet rental portal listing sites as well as the properties we have available internally and properties actual leased data.
THE PRICE TRAP…
Managing and renting properties is not a guessing game. We want to find the best possible tenant in the quickest possible time in the real time rental climate. If we were to value the rent under the market you could be at a financial loss – or if we overvalue the weekly rent it could lead to reduced interest from tenant, an extended vacancy period and financial loss. We want to get it right for you and with data that is accurate.
"How much will my property rent for?", "What is it worth?" "Should I increase the weekly rent? and if so, by how much?" These are questions that we hear and provide appraisals and advice on every day.
How much will my property rent for? Supply and demand determines the achievable rent of a property. When the demand of tenants is high and there are limited properties for rent, the weekly rent achievable can increase. The best way to determine the rent is by conducting a Comparative Market Analysis (CMA) on what other similar properties are renting for in the area. This research can be undertaken by looking at public rent websites.
What is my property worth? Once again, this is determined by supply and demand of the buyer or tenant and how emotionally attached they become to a property. The best way to determine the sale or rental price is by conducting a CMA on properties sold and leased in the area, rather than the sale or rental wish price. It is easy for an agent to list a property at any price, but is it going to sell or rent?
If you are selling your property and want a quick sale, an unrealistic price can cost you additional interest and lose potential genuine buyers. If you're renting your property, an unrealistic rent can lead to long term vacancy periods because there are better value rentals around. These long-term vacancy periods due to overpricing your rent, can often have a greater financial loss to you than the extra $40 per week you may be asking, so it's very imporant to be aware of the price trap.
As an investor we always recommend that you do your own research in addition to the CMA information that we provide. Should I increase the weekly rent? and if so, by how much?
Our agency recommends regular rent increases (at least one per annum) as it becomes an expectation of the tenant and avoids high increases if one has not been implemented for some time in accordance with the market. However, if they have been exceptional long-term tenants and the rent increase could result in the tenants having to leave, it may be a consideration to weigh the pros and cons of having quality secure tenants in comparison to possible vacancy periods and additional advertising costs.