How does one go about estimating the weekly rent of a property?
What factors must be taken into consideration?
Thanks
TimHi Tim,
The appropriate weekly rent for a property would be largely dictated by the market i.e. what are tenants willing to pay for similar properties in the area. Talk to some property managers in the area.
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http://www.depreciator.com.auHi,
From my research a good starting place is to take 5% of the property value. This gives a rough $ value to adjust based on surrounding conditions.This is assuming a house with 3 + bedrooms in a large city.
eg: 3br house in Melb suburbs = $300,000 price. x5% = $300/week.That is pretty rough working and you may need to adjust up or down from there. For example, if it has nice fixtures like good A/C and heating and nice carpet / wood you might leave it at that. If it is a small apartment near lots of workplaces / universities you might be able to add a bit. If it’s a bit out of the city you may need to drop it a bit.
You’ll still need to consult rental prices of other similar property but if you are looking for a general indication 5% seems pretty close to the final price.
Surrey, I think you need to downgrade that figure to 3.50% or less in Sydney. 5% gross is considered an amazing return on most Sydney investment property.
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Essential LinksThanks for your replied so far, that give me some sort of guide.
I’ve just found these forums and I’ve had a look around. I’ve read some posts that say that positive cashflow is not realistic anymore. I’ve only read half of Steve’s ‘0 to 130’ book over the weekend, and I don’t own or rent any property at the moment.. so all I know is know I’ve extracted from Steve’s book.
But, from what I’ve read, Steve had trouble finding positive cashflow property in metro areas also, which is why he started with Ballarat. Is this correct?
So, my thoughs are, if you do your research properly, and not go looking for a property in areas that I want to buy (rather buy where the tenants are), then positive cashflow is realistic if you do the work.
Is this a logical though process, and is it correct? Or have things changed?
I usually use the 5% idea & then surf the net for rentals in the area but all areas are definitely different. I have a property in Willaston SA (Barossa Valley region) with a 3 bedroom house renting at $180/wk & single bedroom granny flat renting at $115/pw but I am struggling to sell for $247,000[blink] It just shows the times we are experiencing at the moment.
I look in the newspaper or real estate web sites for a similiar properties in the same area that is being advertised for rent to estimate the rental market.
Another way is to go to the area and look at the rentals the real estate office has.When you think you have a good idea of how much to rent your property out for, drop into some rental property open times and compare the property/price to your own.
Two identical houses side by side could rent out for very different figures if one is a bit run down while the other is freshly painted etc. So it’s not enough to just say “what does a 3 bedroom go for in this area?”
Yeah 5% is pretty generous. In Mandurah WA gross yields are about the 3.5% – 4.5%.
Still 5% is a nice place to start if you are looking for a place to start.
Hi Tim,
It’s great that you’re looking to learn and accessing some of the resources that are going to help you. With regards your comment about finding cashflow positive investments it is not that straight-forward.
When you read into Steve’s books a little more and look around this forum you will discover that these days it’s extremely rare to be able to purchase a residential property and find a tennant and expect it to be cashflow positive at the outset. Cashflow positive investments are made by adding value, either by renovating, subdividing and building, or wrapping etc. There’s a lot more to it than “finding” a CF+ investment. As Steve says, you have to solve somebody’s problem, and in doing so you may be able to create something that becomes CF+.
Good luck.
pr
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