Getting into the property market can be one of the safest and yet one of the most lucrative ventures for many investors and for those buyers looking to buy an investment property to rent out it can quickly become a complex exercise.
For first time landlords, it can often be a problem gauging the market formalising the ideal rental price. There are many factors to consider, and if you don’t assess your property value correctly you could end up over- or undercharging and neither are situations you want to be in.
So to help the prospective landlord we’ve put together a list of guidelines on how to evalute your property for rental.
How to evaluate the value of a rental property
External and Internal Considerations
Suburb, sea views, amenities, schools, business districts, transport routes all play a key role in the demand for a rental property and frequently we will see homes of equal value and features several kilometres apart charging totally different rental prices due to their location factors.
Internal factors need to be assessed in conjunction with elements out of your hands, such as the condition of your property. In this instance, you need to be very honest with yourself and identify any issues a tenant might have; cracks in the wall, paint peeling, cupboard space, kitchen size etc.
The main thing to remember is that you have to view your property through the eyes of somebody wanting to walk in and call your place home. Here are 6 tips determining the best price for your rental.
Get an estimate
The accepted calculation standard for a long time has been to charge up to 1.1% of the property’s value in relative terms. However, as the property’s value increases the percentage of rental yield decreases because of the low demand for rental in high-value properties.
It is best to attain a comparative estimate by an established local rental agent who has a good sense of the market and demand in the particular area – as this the current trend will have an effect on your rental price.
Establish the market-related sales value of the property. The national average yield (gross) on rental properties or their rental-to-sale-value ratio is roughly 6% to 7%.
Unsurprisingly some suburbs have higher levels of demand and will obtain higher rental values.
Calculate your bond repayments, levies and other expenses and compare them to a realistic rental income; this way you can determine what you can afford as well as decide whether you should let the tenant pay for water and electricity or if you’re able to absorb some of the costs to make the property more appealing.
Do a contrast of similar offerings online and remember that the better value units will always rent first. A private landlord can start their search online and probe into some of the busiest online destinations where average tenants will start their search as well.
Be aware of matching ‘asking’ or ‘listed’ prices, as these are often over-inflated, in the hope that these units will achieve more than the average. However, rentals are often concluded at lower figures.
Offer a fair and reasonable rent to attract fair and reasonable tenants.
If the ad response is very bleak and you’ve ticked all the necessary marketing boxes, then maybe you’ve overestimated the rental price. Reassess and adjust your rental expectation slightly lower and then see what the response is.
Though, if you get a huge response and are flooded with enquiries you can afford to push the price a little higher.
Establish what you offer tenants
Determine if the property has what tenants are looking for:
- Good, safe suburb (location)
- Generous, clean spaces with ample cupboard space
- Safe parking
- Balcony or a space to go outside
- Modern kitchens and bathrooms
- A shower option
- Plumbing for ‘wet’ appliances
Getting a second opinion
Get all the required information regarding the value of your property and what you have determined your rental amount to be. Getting a second opinion from a professional estate agent, and to ensure whether the information you have gathered is accurate and your price fair.
Finding a local estate agent to assist you in managing your property is undeniably still the best option. They will not only accurately measure your rental income, but guarantee all the legalities are followed and tenants are managed professionally and lawfully.
Tenants are shopping around
Landlords should be aware that modern-day tenants are far better equipped with information and options in their hunt thanks to the internet. They are now able to instantly look up options for the rental property and as a result, they are choosing more wisely and cautiously.
How to gauge the market
Once you’ve evaluated your property using all these guidelines above and determined a price, you can then gauge the market by the ad responses you receive and demand for the property. Using this information you can then assess whether your rental expectations are too high or too low and mind a fair market rate that suits both parties.
Take the legal route
If you’re looking to evict a tenant from your property and want to avoid a long drawn out case or want to limit your risk then present your case to an eviction lawyer. As a specialist in the field of evictions, our team of lawyers will evaluate your case and give you solid advice if you have a case that will hold up in a court of law.
If you need advice on your eviction case or would like us to represent your case, get in touch with Le Roux Attorneys