Buyers looking to purchase an investment property to rent out often have difficulty determining the accurate rental price. There are many factors to consider and if you don’t assess your property value correctly you could end up over- or undercharging and neither are a situation you want to be in.
Initial rental price calculations
The accepted calculation standard for a long time has been to charge up to 1.1% of the property’s value in relative terms. Take note that as the property’s value increases the percentage of rental yield decreases because of the low demand for rental in high value properties. In some cases rental price go as low as the .7% mark.
A lot of other variables need to be taken into account, with one of the most important external factors influencing rental price being the location of the property. Suburb, sea views, amenities, schools, business districts, transport routes all play a major part in the demand for a rental property and often we will see homes of equal value and characteristics several kilometres apart charging completely different rental prices due to their location factors. Another key variable is supply and demand and depending on the current trend this will have a definite effect on your rental price.
Once you’ve assessed the advantageous features of your property you need to research property comparisons in your area to get an idea of what the local standards are. Browse listings of estate agents or property portals and locate properties of similar value and features. In addition give the local estate agent a call, if they’re worth their salt they’ll be able to assist you and give you a great idea of what rental income you can expect. Consider every little detail.
Internal factors need to be assessed in conjunction with elements out of your hands, such as the condition of your property. In this instance you need to be very honest with yourself and identify any issues a tenant might have; cracks in the wall, paint peeling, cupboard space, kitchen size etc. You have to view your property through the eyes of somebody wanting to walk in and call your place home.
Do you cover water and electricity?
Calculate your bond repayments, levies and other expenses and compare them to a realistic rental income, this way you can determine what you can afford as well as decide whether you should let the tenant pay for water and electricity or if you’re able to absorb some of the costs to make the property more appealing.
Once you’ve evaluated all these guidelines and determined a price, gauge the ad response and demand for the property to assess whether your rental expectations are too high or too low. Demand is a great indicator of your property’s value as many tenants are knowledgeable of what realistic rent prices are. If the ad response is very bad, and you’ve ticked all the necessary marketing boxes, then maybe you’ve overestimated the rental price. Reassess and adjust your rental expectation slightly lower and then see what the response is. If on the other hand you get a huge response and are inundated with enquiries you can afford to push the price a little higher.
Your local Harcourts agent can help clarify rental pricing
In conclusion, all of these guidelines are only a drop in the ocean in comparison to the knowledge worthy estate agents have and it is undoubtedly still the best option, to find a local estate agent to assist you in managing your property. They will not only accurately measure your rental income but ensure all the legalities are followed and tenants are managed professionally and lawfully.
This article originally appeared on the Harcourts South Africa website: How to determine the rental price of your investment property.
It’s no secret that spring tends to be a busy time for buyers as more homes tend to be listed than during the cooler seasons of the year. If you’re looking to sell in spring here are five ways to freshen up your home and help it stand out from the crowd.
As the name suggests, spring is the perfect time to clean, tidy and generally declutter your home. Decluttering in particular is an important step to take when listing your home for sale, as clutter can detract from the potential of your home, with buyers unable to properly envisage themselves living there. If it doesn’t put them off making an offer, it can hurt the offer they put in, with some research suggesting buyers commonly under-value cluttered homes.
Spring is also a great time of year to get in there and tidy the garden. Why not take advantage of the ideal climate and plant some new ornamental, but fast-growing and hardy plants as well to add to your homes curb-appeal. It’s also important to weed the property, keep the lawn looking its best through regular mowing, and make sure that any clutter which does not belong outside is brought in, or thrown away.
If you’ve been meaning to finish painting the spare bedroom or fixing the back fence, spring is the perfect time to get it done. Not only is the weather more favourable, but buyers will certainly notice half-finished paint jobs or any repairs that are needed and they may be inclined to subtract the total amount of odd-jobs from any offer they make or turn their interest towards a home that’s ready to move in as is.
Have you been meaning to donate a few pieces of old furniture to charity or upgrade a tired looking couch. Whilst you may be holding off the purchase of new furniture until after you move home, don’t let it be at the expense of selling your current property. If furniture is only slightly dated, why not spruce it up? Add new, bright cushions to couches and chairs or throw a crisp, white table cloth over a tired dining table.
If furniture is particularly worn or dated, why not consider moving it out of the home and having your property professionally staged for sale? That way an expert can select the pieces that will best complement your home and make it as attractive as possible to buyers.
Don’t forget about the finishing touches
Once the garden is looking great, the house is clean and tidy and maintenance is sorted, don’t forget to make sure the house looks like a home. This can be as simple as placing fresh-cut flowers in a vase on the dining table, or fresh fruit in an attractive bowl on the kitchen bench. Remember to charm all of the senses when preparing your home for sale and light candles, or bake during an open home to make the house as inviting as possible.
Without tenants our investment properties start to lose their income potential and become another outgoing cost, but sometimes troublesome tenants can be more costly than a potential vacancy. So what can you do to ensure any early issues that arise with your tenants don’t turn into a major headache down the road?
Here are some steps you can take before troublesome tenants become unmanageable.
Speak with your property manager early
If your investment property is being managed by a property manager, then chances are they are the ones that have identified the issue. Once identified it’s best to try and resolve the problem early before the matter escalates. Depending on the type of problem, your property manager will be able to guide you on your options but will need you to make final decisions.
For example, if during a routine inspection, minor property damage is found at the fault of your tenant, your property manager will notify you and will also notify your tenants, asking them to rectify the issue at their cost in a specific timeframe.
In cases where the damage is not rectified, your property manager will follow-up with the tenants on your behalf and if need be will guide you through the process of making a claim to have the cost reimbursed from the tenant’s bond, which is why it’s important to have the matter discussed as soon as possible as there are timeframes around this.
Note, the latter process has strict rules around it and it’s best to have a chat with your property manager or receive expert guidance on how to proceed.
Make sure everyone understands their obligations when it comes to rent
As a landlord, you have entered into a legal contract with your tenant to exchange accommodation in return for payment.
Make sure you’re clear that rent must be paid in full and when it’s to be paid i.e. make sure your tenant knows you won’t accept partial payments. If your property is being property managed, your property manager will make this clear to the tenant from the outset, in writing.
When it comes to rent that has fallen into arrears, there are things to consider before starting formal proceedings, again your property manager will guide you through this process and handle communication on your behalf.
Make sure you are getting regular property condition reports
Property managers know the ins and outs of property condition reporting and can perform these or organise to have them performed on your behalf.
Property condition reports protect you from potential conflict with your tenants down the track by ensuring photos, and detailed descriptions are taken for the property at the start of a lease agreement. This means if any damage is found when the tenant moves on, you’re both protected by a condition report which can easily prove if the damage was existing or not.
Be prepared if a dispute does escalate
If an issue can’t be resolved, a property manager can appear on your behalf to provide evidence and handle complaints which are referred to an administrative tribunal.
Property managers are required to keep detailed records of an agreement, inspections and even conversations, all of which are helpful when disputes escalate. If you are managing your investment property yourself, it’s also a good idea to ensure you keep track of notes made during inspections and conversations.
As your single largest investment, you’ll probably spend a great deal of time searching for or designing your perfect home. When house hunting, you’ll consider things like location, price, market trends, costs and the condition of the property. And you’ll probably have a list of things you absolutely have to have and those you’re prepared to forgo. Deciding whether to buy an existing home or build a new home is an important part of your decision. To help you make an informed choice, we’re taking a closer look at each option.
Buying An Existing Home
The primary advantages to buying an existing home are convenience and cost. Once you have pre-approval, you’re able to shop around, pick out the home you like and then make an offer. Working closely with your mortgage adviser and your real estate agent, you’ll already know how much you have to spend, and have a list of properties that fit your requirements.
Despite a number of steps involved – arranging finance, attending open homes and auctions, getting inspections done – once your offer is accepted, you’ll be able to move in within a month or two, all going well. Buying an existing home is ideal for those buyers on a tight schedule – relocating for a new job or whose children are starting school in the area
The Cost Factor
In many cases buying an existing home may be more cost effective, particularly if you’re looking to move into an established neighbourhood near your work, school, friends or family. You may find it hard to find available land in these areas, so buying an existing home will be your only option. It also means that your garden will already be established so you won’t need to worry about starting a lawn, planting shrubs or waiting for trees to grow.
On the other hand, buying an existing home means you may not get exactly what you want, and you may need to spend money remodelling, repairing or redecorating any outdated features of the home. These additional costs could make the difference in deciding whether to build or buy.
Building A Home
While building a new home is not as convenient as buying an existing home, it does mean you get the home you want. One of the biggest advantages to building a new home is the fact that everything is new. You’re also able to build in features that make your home more energy efficient, like heating, cooling, insulation or air filtration systems that are environmentally friendly, saving you money in the long term.
In fact, your home may quite literally be better for you as it’s less likely to have health concerns or toxic materials you may find in an older home – things like asbestos, lead paint or mould. And it can be built using materials that are better for the environment like Energy Star rated appliances and more efficient plumbing systems.
The Cost Factor
While the cost of building involves a number of upfront costs, it’s easier to recoup your investment long term. A newer home will require less repairs and lower ongoing maintenance, and is likely to fetch a higher resale price when you decide to sell.
The biggest drawback to building your own home is that it’s not immediately available for you to move in, and the costs may be higher. But money and time aside, building your own home can be emotionally satisfying in that you feel you’re achieving a dream and living in the home you created; a home that perfectly matches your style and personality.
Build Or Buy
Whatever you decide, it’s vital you seek professional advice before you commit to any decisions. Determine how much you can spend and obtain a pre-approval from your bank or lender. This will help frame any conversations with builders or sales agents should you buy.
Proud recipient of the Moreton electorate’s Australia Day Award 2016 – Principal and Director David Gowdie of Harcourts Graceville was recognised for his services to the community as the creator of a local magazine called Living in The Shires.
This magazine is hand-delivered by his sales agents to 12,000 homes and businesses in an area covering six suburbs of Brisbane, Australia – Tennyson, Chelmer, Graceville, Sherwood, Corinda and Oxley.
This magazine is David’s brainchild. The primary motivation of was to have a magazine that specifically catered for his community. It is not a newspaper in the traditional journalistic style, but more of a storytelling vehicle – ‘creative non-fiction’, if you like. It tells stories about local businesses, community events, some of the area’s incredible residents, and its history.
A deliberately small back section of the magazine is devoted to Harcourts Graceville, a break from the content marketing and storytelling . Even though David includes some advertising for his Harcourts business in the magazine, this is kept to a minimum.
Living in The Shires is a big investment for David. In terms of marketing opportunity costs, it is a ‘slow burn’, but increasingly the magazine is being associated with the Harcourts Graceville brand in a positive, feel-good, way. The beauty of this publication is that it has become the ‘glue’ for a community, engendering much pride in the area. And it gives the sales agents a fabulous entrée when engaging with local people – there is always something to talk about. The feedback to Harcourts Graceville is that the magazine gets read cover to cover, and its delivery is eagerly anticipated. It truly is a marketer’s dream.
The magazine has been so enthusiastically welcomed that print copies of back issues are now fast becoming collector’s items. The State Library of Queensland, at its request, now holds two print copies of each back issue. Electronic editions can be found on the dedicated Living in The Shires website, as well.
Susan Prior, a professional writer and editor, project manages the publication, which is printed on a quality recycled paper stock using environmentally friendly soy inks. David also uses professional graphic designers. Living in The Shires is rapidly becoming known for its very different and eye-catching cover art – a deliberate ploy to ensure it doesn’t get thrown in the bin.
David’s initiative with Living in The Shires reflects his oft-cited observation that ‘givers gain’. His staff and everyone associated with the publication are incredibly proud of it and David’s success.