Hi,
I recently purchased my first ip in a suburb which has a vacancy rate of about 1.4%. The selling agent said it would achieve about $380 per week in rent. The property manager (from the same agency) said it is worth $420. So I took her advice and it has been advertised at $420 for the past week. So far, zero applications. I know it has only been 1 week, but should I drop the rent to $380 now? I cant afford for it to be vacant for a long period.Thank you!
Suzy15
Email MeOne week isn’t too long. Have you had any interest at all? If you have no luck after the second week then I’d look to reduce.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Assess your market.
How are things going in XXXTOWNXXX (insert burb name here)?
Are the properties flying off the shelf at your level of interest or are they hanging there for a couple of weeks?
You see .. this is where a top Property Manager (you know those guys that NEVER get respect for what they do .. even WHEN they do it right) who is worth his salt does his interference. He’ll tell you if the market can handle X dollars or if you are pushing for a harder to get amount. I appreciate it when these guys are to my face honest on rental markets .. it qualifies what I pay them.
At the top of the pyramid you’ll have what you push for .. above market rents .. or PREMIUM rents. As you might guess .. you must match what the market demands or better to get that. Premium rents are worth pushing for.
This is what everyone sticks the extra fancy washing machine or cooktop in to get .. the best bang for their buck .. and it comes out the other side … as a better rental price justifies that in the sale price .. hence all the recent ‘reno for profit’ craze.
But you want your dollar for rental to meet YOUR market conditions too.
The question always comes out to ‘how long can you hang out to meet the market conditions at a premium price’
At a low white collar worker level of @400 you should be ok within a month .. if you are pricing right.
If its vacancy that is your prime issue not price .. get a butt in there at whatever cost 3-6m .. you can always raise to market on them.Whether its sale or rental .. the worst thing is to hang out for the perfect price and miss the market as you do so.
One of the best lessons I learnt from stocks is .. work out what you’ll accept .. and your break price .. and dont panic either way on trying to find a ceiling or a trough .. just make sure your back pocket rules ok.
The same holds true with housing.
Hi Suzy,
Some good thoughtss already – here’s mine too…. Keep the “numbers” in mind. What if you might need to wait 3 weeks to get someone to rent it at $420/wk? Or, opposed to that, what if someone will pay you $400 straight away?Using those numbers as an example:-
Run the numbers, and you will see that you will lose $420 x 3 = $1260 by holding out. But if you take $400 and it is taken straight up, then you are only “losing” $20 a week based on what you “might” have got. Now divide $1260 by $20 – you get 63 weeks that it takes before you “lose” $1260. But, you might have signed a 6 month lease with your $400/wk renter, and can put the rent to $420 after 6 months. Then, you have only “lost” 26 x $20 = $520. And your mortgage will be mostly covered in all of those weeks.Benny
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