IS PUTTING UP THE RENT THE BEST WAY OF

MAXIMISING THE RETURN on your investment property?

Tony Morrison1

Is putting up the rent the best way of maximising

the return on your investment property?

Tony Morrison

It is a common assumption that rents should consistently go up from one tenant to the next.

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Whilst this can happen you need to be aware that thisIs not always the case and you need to understand what you can do

To help increase the return on your investment.

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Sometimes leaving the rent where it is can actually improve your overall return.

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Just as in sales the state of the market has a huge bearing on the speed of renting your property and the return you

get for it.

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It is all very much a case of supply and demand. If there are a large

amount of properties available for rent similar to yours then this

is going to affect your return and speed of renting.

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If your property is available in the warmer months you generally have more tenants looking to relocate which

leads to competition and sometimes higher rents.

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On the other hand if your property becomes available in the colder months there are generally less rental properties

competing against yours.

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LEASED

Whilst premium prices are harder to achieve in these months less competition can at times lead to shorter

vacancy.

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A common comment that property managers get thrown at them is -"I have been getting $300 per week rent for five years from the same

tenant so with a new tenant coming in surely I should get a lot more?"

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This may be the case but if you have done no maintenance or

upgrading of the property over this time your rent may very well have gone backwards.

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There are very few home owners who over a five year periodwouldn't do a reasonable amount of maintenance or simply

upgrade parts of their house to maintain its value.

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At the same time many investors will spend only the absolute minimum on their investment property and expect its value

and rental return to keep going up.

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If you are in a buoyant market, whether it be for sales or rentals

this can happen but if the market is average or indeed going backwards sometimes money needs to be spent purely to

maintain value, let alone increase it.

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The renting of homes is a competitive business so if you want to

rent quickly for a greater return you need to be more visible than

your competitors.

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You can do this by making sure the company trying

to rent your house has a strong presence online, with a good experienced team and up to date data

base of prospective tenants..

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Then you need to be either better presented than your competition or be better value price wise.

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Whilst it is always tempting to put the rent up between tenants or

even mid tenancy an often over looked fact is that ...

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Landlords are inviting complete strangers into their propertiesto look after and maintain their investment that their hard

earned money has bought.

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Therefore the quality of the tenant is just as importantas achieving the maximum rent.

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If you have ever had a bad tenant you will know how much damage

to the value of your property that a poor tenant who is prepared to

pay a little more can actually do.

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Pushing prospective tenants to pay absolute top dollar for yourproperty is also one thing that can lead to tenants falling behind in

rent as they struggle to meet their many life commitments.

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The hassle of chasing slow payers is also a pain for landlords whoare often reliant upon rent coming in consistently on time to

meet mortgage payments.

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There is also strong evidence to suggest that tenants who pay top

dollar are less likely to stay long term as they are on the look out

for cheaper options as soon as their lease expires.

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This can lead to potential weeks of no income for the landlord whilst tenants who consider they are paying a fair and reasonable rent may stay a lot longer which can save the landlord expensive re letting fees.

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If you are successful though in chasing the extra $10/15 a weekrent that you are wanting but it takes a long time to achieve this

figure it is a worthwhile exercise to actually work out how longit will take to make up for the rent you have missed out on. It just

might not be worth the extra rent.

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In conclusion in evaluating the true return on your rental property it is not just about calculating your weekly rent.

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It is also about how many days the property sits vacant each year, how often you have to find new tenants, whether ongoing

maintenance and upgrades are carried out regularly and whether your tenants feel obliged to look after your investment.

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The question is will putting up the rent help or be detrimental in all the other areas which form part of the overall strategy to maximise

your return on investment?

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This Key note was created by Tony Morrison,CEO Harcourts Tasmania to help investors understand how to maximise the return on investment of their rental properties.

tony.morrison@harcourts.com.au