Rent reduction could ‘save landlords thousands’
Despite many investors resisting rent reductions, one property commentator has indicated that taking a hit could ultimately help owners in the long run.
RE/MAX WA managing director Geoff Baldwin said investors too frequently avoid adjusting their property’s rent when it is vacant or soon-to-be vacant.
“It is very common for owners of rental properties to insist on their property manager finding new tenants who will pay the same or even higher rent than the vacating tenant. However, this can often be a false economy,” he said.
Mr Baldwin said investors need to constantly evaluate the rent they're charging and understand drivers such as how many other properties are available, the number of tenants looking for accommodation, the time of year and the rents being achieved by comparable properties.
He said investors with unrealistic expectations will end up costing themselves money in both the short and long term.
“Often owners will hold out vacant for weeks attempting to attract a tenant to pay a higher rent, only to eventually be forced to meet the market anyway. But in the process they have not only had to reduce by $20 or $30 a week, they have lost thousands through their property being vacant for a long period of time," he said.
“When notice is given that a tenant is vacating it is important that a frank and open conversation occurs between the owner and their property manager, whereby an achievable rental amount is set that will ensure vacancy periods are avoided.”
Mr Baldwin said an additional benefit of asking for an “attractive rent” rather than overpricing the property is that owners will likely receive multiple applications, which will “provide the owner with more opportunities to find a quality tenant”.
Investors may be able to increase their rent, he said, but they always need to keep an open mind and a close eye on the market.
“Of course it may be the case that a property can maintain or even increase its rental income capacity, but it is much more sensible to be tenanted than it is to be waiting vacant for a premium rent,” he said.