Property Investment Tip: The best way to set your rent increase

“Most landlords, they forget … [that] the market ... can go up and down … Property values are increasing quite dramatically but rents do fluctuate a little bit more—they definitely don't grow at the same rate that the properties value has been,” Thom explained.

Many property investors tend to go by a median price or the “suburb average” when setting rent prices, but the property management experts said that the best way to arrive at a good value is to find comparable properties. As the rental market changes, taking advantage of the infinite data available through realestate.com and other similar websites and companies will make the process of determining prices more convenient for property investors.

Nick said: “The property market in Australia ... is probably one of the richest markets in terms of data, so there's plenty of stuff to point to—whether it be from your tenants to your landlord [or] whoever you're trying to convince that what you're proposing in terms of rental increase is justified.”

“Check out the photos, make sure that the likeness is close enough … [so you can say], ‘That one’s got $750,’ [but] he's got a slightly newer kitchen, so I'm probably going to sit around that $730 mark.’ I think that's the best yardstick for choosing where your property should sit,” Thom added.

 The role of a property manager

A good property manager comes in handy when determining your rent increase becomes a little too overwhelming. After all, it’s their job to analyse markets on behalf of the landlord and say with certainty whether or not an increase in rent prices is justified.

On the other hand, they may also pull property investors back and say that a rent decrease is more likely to help the asset’s overall performance.

According to Nick: “Sometimes, going the other way makes sense to avoid things like vacancy, which can really hurt you … [A] rental decrease of $10 a week or something like that can ... [save] you three or four weeks of lost rent.”

Phil, for instance, initially set a $300-rent for his property in Mount Druitt when, all of a sudden, there was a huge influx of property investors in the area, which dwindled the demand for rental properties. They had to bring their rates down in order to get a tenant in, and while it may look like a negative impact on his portfolio, having a trusted tenant in the property is better than leaving it vacant for even a short period of time.

Property managers can help investors navigate their way through the unpredictability of rent prices. In fact, most investors set time aside each year to have a thorough discussion with their property managers about their plan of action for the months to come—like an “annual health check,” according to Phil.

Nick advised property investors: “[Have that conversation] even just before the term of the lease … depending on where you come into the cycle ... Even [every after] six months, you should be having that conversation.”

“Continuously [check in with them] ... in case things change,” Thom concluded.

 Tune in to Thom Richards and Nick Bouris’ episode on The Smart Property Investment Show to know more about the best tools, tactics, and tips to manage your properties and make the most out of your investment.