At the end of each lease term, a property owner can request for a comparative market analysis to be conducted to determine the appropriate rent level, and ensure they get the best market rate.
In the current tight rental environment, this usually equates to an increase, with rental increases anywhere from $5 per week to $50 per week now a pretty common occurrence. After all, market forces haven’t been in the favour of tenants over the past 18 months, with demand outstripping supply.
That supply and demand equation however, can equally work the other way, and its important not to rely just on a lack of choice when it comes to getting the best return on your investment as those dynamics can change, and swing back in favour of tenants – something property owners with leases that came due in March 2020 would know all about.
Investing in your property AFTER purchase, can be just as important when it comes to getting the best rate of return each week, but also in allowing you a greater choice of tenants, no matter the surrounding market conditions.
Proper maintenance should be part of the foundation of your investment strategy (unless you are purely buying for land value), and the idiom holds true that an ounce of prevention is worth a pound of cure. Good sealant and grout in bathrooms saves expensive water damage repairs down the track!
Beyond maintenance though, its also worth looking at the functionality of your property and what tenants are looking for (and willing to pay more to get). It doesn’t have to be a new $30,000 kitchen (though look, your tenants probably won’t complain!) but the simple things like split system air-conditioning throughout and a good fenced outdoor area are going to be features that will make a big difference both for existing tenants looking to renew and prospective new tenants comparing your property to other options. I have even seen tenants volunteer a rental increase on the basis of specific works being done – guaranteeing you a return on your investment from day one.
So what can you do? If you have an existing property, talk to your property manager about what features are letting the property down, or missing in comparison to others in the market. Find out the potential difference in rent and do the sums on what it could do to your returns.
Looking to get started with something new? Make this part of your homework, and don’t be afraid of a lease coming up soon – it could be an opportunity to make some improvements in between tenancies or make any new works part of your lease negotiations.
Tom Quaid is the REIQ Zone Chair for Cairns