There is so much easily accessible and often conflicting information online about what is a fair rental price for your property, and it’s easy to be misled. Every investor wants the best price for their property, but it’s important to know what’s too much, or too little. So how do you find the right price? Well, first, let’s look at the problems with the wrong price.
Problems with setting an incorrect rental price
There are property investors at both ends of the rental price spectrum. At one end, some investors spend a fortune on their property and expect tenants to carry the load of hefty mortgage repayments. At the other, some investors believe that asking for below market price will attract better tenants who are more likely to pay on time. Neither of these are effective methods.
Setting the price too low means that your property is not functioning optimally as a successful investment. You want the highest profit whilst still inline with market prices. But setting your rental too high can have dire consequences on your pocket too.
Consider this: let’s say you lower the rental price by $10 p/week, over one year you’ve lost $520. However, if you list your property above fair market prices and it remains vacant for 2-4 weeks, the lost revenue can often exceed that amount.
How to get the right price?
So now you understand the importance of setting the right price, the question is how do you find out? A quick Google search will take you to sites such as realestate.com.au or domain.com.au to check comparable properties, but it’s not quite that simple. These sites are a good starting point, but they shouldn’t be the single determining factor for setting a rental price. Knowing your competition is important, however, your property manager should have access to sophisticated data software for Comparative Rental Analysis. A CRA is a critical element to setting the right price. The report reveals how much a rental property was listed for and how long it sat on the market. But the most important information in a CRA report is the difference between the initial listing price and what the property eventually rented for.
The final word
The advertised price and the eventual rental price of a property are not always the same. This is why conducting your own research is not enough to determine a fair rental price for your own property. You will also need to know how long a comparable property was listed for before being rented. And this information is even more paramount if your property is vacant at the time. Correct pricing is very important for getting the best profitable rental amount, and getting it rented in a timely manner. The combination of sophisticated CRA data and current listings is key to setting your rental property for the right price. Property managers are experts in market research and have access to information that is not available to the public.
For these reasons, your property manager is the best person to get the right rental price for your property, and even better, they’re happy to do the leg work for you!