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You’ve bought an investment property, you may even have fixed it up a bit and now you want to figure out how much you should charge for rent. It can be a little stressful, especially if it’s you’re first investment property and you want a good return. It’s ok, many people have been in your shoes and it’s all about having the right information. Here are a few things should know and do:
Understand the Market
One of the first things you’re going to want to do is get an understanding of what the current market is like in your local area. Look at the average rent that properties are going for at present or very recently, within the last 6 months and no later. Next look at the rents of comparable properties. A comparable property is more than just a property in the same local area, it has the same features as your property, these include:
∙ Size: This will include land size, the size of the property itself, whether it is 1 or multiple stories, the number of rooms, garage size etc.
∙ Local Amenities: What amenities are in the same distance to your property this will include, schools, transport, parks, and shops.
∙ Extra Features: If your investment property has a swimming pool or an outdoor kitchen then the comparable property must also have these features.
If the comparable property is missing any of the features that your property has then it is not a true comparable and will be considered an inferior comparable property. The reverse is also true, if your property is lacking compared to another then it is a superior comparable
Set a Competitive Rate
After looking into what the current market is in the local area then you will want to set a rate that can compete with the others. The last thing you want to do is set a rate that is solely based on the income you want to receive from the property. It could be very tempting and very understandable to do just that, but you run the risk of setting a rent that is too high. A high rent for the value of the property will surely turn away many prospective tenants and could leave you with an investment property that sits on the market for months.
Consider the added costs and maintenance of the property
As with many investments and all things to do with money, you’re going to want to budget. With an investment property, many costs will fall on you the owner. Here are some things you should factor into your budget:
∙ Council rates
∙ Insurance
∙ Interest rates from your loan repayments
∙ Unexpected repairs and general maintenance of the property
∙ Fees as part of being in a Strata, for example, an apartment complex.
Get a Professional Valuation
The easiest way to find out the value of your investment property and to get a report on the current market is to ask a professional. By getting a Property Valuation from a certified valuer, you’ll have everything you need to know to be able to set your rent. For more information, contact us and we’ll be happy to help.
John Carter is a skilled and experienced senior property valuer working within the Perth CBD and greater Western Australia. He has niched expertise in multi-use commercial properties, gained over his two decades as a property valuer. John is considered one of the leading experts within property valuation in Perth, and has passed his specialised knowledge on through industry training programs. His attention to detail and passion for property market research has inspired the next generation of valuers at Perth Property Valuers.
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