How Do I Determine the Right Rental Price for my Property?
Even as the world continues to grapple with the effects of COVID-19, the residential rentals market in Western Australia has seen a definite tightening. Recent data from REIWA showed listings for rent in Perth dropped to their lowest levels since November 2013, falling below 5000 to 4676 in the week ending May 31.
Whilst the residential rental markets experience higher demand, in order to stimulate the building and construction industry, there have been new federal and state incentives offered by the government recently. Why? One simple reason is that there are lesser buyers that can afford to purchase a property during a recession, hence there will be more residential rentals in demand.
So how do you know if your rental is over or under-priced? What is the process of setting the correct rental price and the nitty-gritty involved?
1.Local Comparative Market Value
The right price for a property is what the market is willing to pay.
In deciding the range of potential prices, Property Managers will consider similar stock comparable in the market for the area including size, style, number of bedroom/ bathroom/ car park and amenities offered.
Since only licensed estate agents have access to information regarding properties that have been already leased, not just advertised, they are able to predict trends more accurately.
Next, the Owner needs to position the product (rental property) against the current competition – properties already in the market currently. Here is when objectivity comes into play.
At times, Property Owners feel that they should get a higher rental price. They could be those who may have over-committed to a large mortgage and expect their tenants to foot the bill for monthly repayments regardless of whether the rental amount is reasonably or not.
On the other hand, there are investors who will price their properties very low as they feel that setting the price lower will guarantee better tenants who are more obliging when it comes to making payments on time.
Neither of these strategies really work.
A property manager is tasked to ascertain the right price, by not only performing extensive research (beyond what is available on the internet) but also to draw on their experience. Particular focus should be paid on comparable rental prices in the local area. In addition to having the price affected by a suburb location, the very street itself may add to the variation.
2. Added Touches
Securing the best possible price for the rental as well as high-quality tenants, remember that first impression counts.
- Garden areas - tidy up your front and back lawns, mow and weed the garden.
- Comfort & cleanliness – a fresh coat of paint, ensure there is ample light, window treatments and that the internal areas are clean.
- Professional photography – you can re-use the professional photos over and over. It will have a direct impact on the number of enquiries you receive and the price you can achieve for your property.
- External areas are particularly important for Perth tenants due to the beautiful weather and outdoor entertainment lifestyle.
- Appliances – once upon a time luxuries are now considered necessities such as heating/ cooling systems as well as dishwashers.
- A place for everything so that everything can be in place – storage!
- Make pets negotiable and put pet bonds in place to ensure the right clauses to protect the property. At 62% (2018), Australia records amongst the highest household rate of pet ownership in the world with dogs, cats and fish being the most popular choice.
On a final note, inasmuch as sales agents are experts on sale prices for the property in their area, and should be relied on to provide estimates on the sale price of a property, property managers should be depended on to provide accurate information for the rentals market. These are distinct markets that require different expertise. Which is why you should always consult a good property manager to obtain the best possible assessments for the rental property.
Finally, do your research, ask the experts and be realistic. That way, you can be assured that your rental is priced correctly.