Most experienced residential property investors understand that even a few weeks’ annual vacancy brought about by setting rent too high usually means a lower net income than if the property had been rented at just under current market value for the whole year.
Experienced investors know that maximising income from rental property investment comes from keeping their properties occupied rather than by setting high rents, yet there are still landlords who expect to rent their properties for 110% of market value - in spite of the risk of incurring high tenant turnover and concomitant vacancy. Dissatisfied tenants who move on when they find a better value option create a cycle of higher turnover and further weeks of vacancy.
Furthermore, investors whose properties are not good value get less enquiry and can’t afford to be as selective when deciding who will rent their property. This in turn increases the risk of property damage, neglect and arrears.
Being selective means checking references (these days references are even available for pets!) but beware of taking into account irrelevant criteria such as dress style, marital arrangements and other personal choice issues. The bottom line criterion is Does their history indicate that they would be able to pay $x per week for y weeks?
If a property stays empty because the rent is too high, owners can get desperate enough to overlook a tenant’s patchy references; in the effort to get the highest income, they make themselves more likely to get less because poor references could mean greater likelihood of getting behind with the rent.
New investors can avoid a lot of common errors by making use of the expertise of their managing agent. Many novice investors don’t think of employing a managing agent until something goes wrong; it seems that many people think property management is child’s play until they realise they are out of their depth. Sadly, many people at this stage decide to sell their investment thinking it is ‘all too hard’ – and of course miss out on the investment benefits that accrue down the years.
Furthermore, investors whose properties are not good value get less enquiry and can’t afford to be as selective when deciding who will rent their property. This in turn increases the risk of property damage, neglect and arrears.
Being selective means checking references (these days references are even available for pets!) but beware of taking into account irrelevant criteria such as dress style, marital arrangements and other personal choice issues. The bottom line criterion is Does their history indicate that they would be able to pay $x per week for y weeks?
If a property stays empty because the rent is too high, owners can get desperate enough to overlook a tenant’s patchy references; in the effort to get the highest income, they make themselves more likely to get less because poor references could mean greater likelihood of getting behind with the rent.
New investors can avoid a lot of common errors by making use of the expertise of their managing agent. Many novice investors don’t think of employing a managing agent until something goes wrong; it seems that many people think property management is child’s play until they realise they are out of their depth. Sadly, many people at this stage decide to sell their investment thinking it is ‘all too hard’ – and of course miss out on the investment benefits that accrue down the years.
