So you’ve got a property, and you’re ready to start looking for tenants.
There’s just one key question you have to answer first: how much can I rent my house for?
It’s not an easy question to answer! After all, setting your rental price is crucial to making sure you actually attract tenants who can look after the property and make sure your investment earns you some money – or at least meets your expenses.
You might have heard all sorts of rules of thumb for setting your rent. For example, a common mantra is to charge $100 per $100,000 on the sale value of the property.
But these aren’t usually very helpful, and for a good reason: they ignore all the little bits and pieces that contribute to an accurate rental price – like how much other houses are renting for in your area.
Now you might be thinking, “can’t I just ask a real estate agent?”
You certainly could! But real estate agents don’t have any special powers when it comes to determining how much rent you should charge. In fact, they have access to exactly the same amount of information you do – and they may even be a little biased in an attempt to get your business.
(Also remember that real estate agents will never agree on a figure – if you ask three different agents, you’ll probably get three different answers!)
So how do you actually come up with a realistic rent figure?
Start at the beginning
First, you need to put yourself in your tenant’s shoes. Think about what someone is realistically going to pay, not necessarily what you would like them to pay. You need to approach this objectively – so don’t get caught into the trap of ignoring what the market suggests you should offer!
Then you need to look online and figure out how much rent you can charge. You can start this by looking at sites such as realestate.com.au and Domain to get a feel for what properties are worth in your area.
Look for comparable properties. So search for homes with a similar number of bedrooms, bathrooms and car spaces. (The number of bedrooms and location will usually be the most important metric when deciding on a rent figure).
Keep your list fairly small – about five comparable properties will help you narrow things down and give you a similar range of rent prices to base yours on.
Then, get an RP Data value report – you can get this free from the Cubbi website. This report is full of up-to-date and quality data that will give you an estimated price based on some key statistics, and some comparable properties in your area that were recently let.Fantastic, your Rental Valuation Report is on it’s way!
So that’s it, right?
Now you might have a good price to get started. But you should still take into consideration some more things that could influence your price – both inside the property, and things outside of your control.
When it comes to your own property, take a look at the overall condition. Are things generally in good repair, including the state of the floors, carpet, and appliances?
(You can read a list of ways to improve the value of your rental property here!)
Compare that with the other properties you’ve chosen on the market that are similar to yours as a benchmark. If yours is in a better condition, you may be able to charge slightly higher rent.
A good place to start is by looking at the kitchens and bathrooms – many tenants will prefer homes with those areas renovated. Other amenities such as air conditioning and ducted heating will also play a part in adjusting your rental price.
Remember to consistently check each of these against the similar properties in your area, and change your price accordingly.
As for things outside your control?
Tenants will prefer living closer to things like schools, public transport and shopping. The closer you are to those areas, or the further away, your rent will have to adjust as a result. (Don’t compare yourself with properties that are too far away – try to stay within a range of a one kilometre. The closer the more accurate.)
Decide on a range
Now that you have finished comparing your place with others for rent on realestate.com.au and have your free RP data rental valuation report from Cubbi you should have a price range you think a tenant would be willing to pay. For example $450 – $475.
What about timing?
You may not think about it at first, but timing is a big issue when it comes to rental prices.
If you’re eager to get a tenant in and paying rent within a short time frame, such as three weeks, you’ll want to charge slightly lower in order to get it rented without any vacancy. On the other hand, if you have more time, you might want to try at the higher end of your range.
The closer you are to your property falling vacant the better you are listing at the lower end to ensure less vacancy.
But remember, if you don’t get enough inquiries within the first week something is wrong. I’d be looking to have about one or two a day through the first two weeks of your listing. It could be the price, but it could also be the photographs and positioning on realestate.com.au that could be a problem. (Here is a list of tips on how to help with that.)
If you’re not seeing the response you expect, make changes along the way.
It’s important to get this right from the start. The sooner you can set an appropriate rental price, the better your entire property management experience will be.
If you need help setting your rental price, Cubbi can help with that. Cubbi is online platform that empowers landlords to rent property without the need for an agent. Cubbi will also check over your listing and provide advice on how you can make it better. Just ask! Learn more about the Cubbi landlord service here.