Setting rents can be a challenge
SOME landlords can find it difficult to set a rental amount for their investment properties.
Setting the rent too high may mean your property receives limited interest and remains empty for an extended period of time, leaving you out of pocket, while undervaluing the property will limit your rental income potential.
Determining a fair rent for you and your tenants involves more than picking a number out of a hat, according to landlord insurance specialist Terri Scheer Insurance.
Terri Scheer Insurance manager Carolyn Majda suggested landlords do their research before setting an appropriate rental amount.
"If you are interested in purchasing a particular property, it can be a good idea to ask the selling agent whether it has been reviewed by a property management team, and if it has, they may be able to provide you with an indicative weekly rent," Ms Majda said.
"However, selling agents are not always specifically trained in the rental market, so ensure you conduct further research and seek other opinions too.
"Licensed property managers can provide landlords with information on comparable properties that have recently been leased in the area and advise an appropriate rent for your own investment.
"You may also consider looking on real estate websites and through newspaper classifieds to find listings with similar features to the property you are interested in, as it will give you a guide on the rental market in that area.
"Generally, properties that are in good condition, well presented, located in desirable suburbs and situated close to amenities such as public transport and schools may attract higher rent.
"Potential tenants will seek value for money, so be objective and think about what your potential tenants may consider to be a fair rent for the property.
"Before you purchase a property, it is also important to ensure you can comfortably afford your monthly repayments - with or without rental income.
"Relying solely on the rental income to repay the mortgage could leave you unprepared and out of pocket during untenanted periods."
Ms Majda said landlords were entitled to raise the rent periodically.
"No tenant wants to pay more rent, however it is sometimes necessary to implement rental increases to cover the rising costs of maintaining a property," she said.
"Small incremental increases each year, in line with the consumer price index, are often received better by the tenant than large increases on a more sporadic basis.
"Before increasing the rent however, it is important to familiarise yourself with the relevant legislation in your state or territory to ensure you aren't breaking any laws or rules.
"For example, you may be required to provide tenants with written notice within a specified time frame before the rent increase can take effect.
"It can be a good idea to address pre-scheduled increases in your rental agreement so your tenant is prepared for these."
Tips for landlords setting a rental amount:
- Before purchasing an investment property, research its potential for rental income
- Consider appointing a property manager who can help you to set an appropriate rent
- Be objective and think about what potential tenants would consider a fair rent to be
- Ensure you can comfortably cover your monthly mortgage repayments - with or without rental income
Familiarise yourself with legislation before raising the rent