Being a landlord can be a tricky balancing act. Maximising rental return is crucial; however, keeping a good tenant is equally essential. While some landlords may need to maximise rent to cover increasing expenses, others may choose not to do so to retain excellent tenants. It’s, therefore, crucial to strike a balance to avoid high turnover rates and the associated costs and risks of re-letting.
Our talented property management team have put together some key factors landlords should consider to help find the right balance.
Market Demand and Competition
Market demand and competition heavily influence the rent that can be achieved for a property. In a strong market where there is high demand for property, landlords may be able to charge a premium price for their property. Conversely, landlords may need to be more competitive in pricing in a weak market to attract tenants.
Human Relationships
When increasing the rent, it’s important for your property manager to maintain a good relationship with your current tenant and part of this includes having crucial conversations when required. None more important than proposed rent increases, especially when it’s a significant rise. Crucial conversations help minimise any surprises and assists with maintaining trust between the landlords and tenants.
Prior to the conversation with the tenant it is important your property manager reassesses the tenant’s affordability to ensure they remain within the range and they are not going to be under unreasonable financial stress as they enter the new term.
Providing the landlord with this information along with the proposed rent increase allows the landlord to ascertain if the tenant is someone you are wanting to stay on at the property and determine the amount to offer as the new rent. A landlord may decide that retaining a good tenant is more valuable than maximising the rent.
Informed Landlords understand the risks and benefits associated with maximising rents.
Tenant Selection
Landlords should select tenants carefully to avoid issues such as delayed rent payments and property damage. The person who can pay the most may not necessarily be the best tenant, so consider key factors such as rental history and references.
Property Upkeep and Maintenance
Higher rent rates may attract tenants who do not look after the property well, leading to early property degradation, insurance claims, and increased premiums. These costs may outweigh the benefits of having higher rental rates over time.
Re-letting Costs
Losing a tenant to gain one who pays more rent may seem attractive, but the costs associated with re-letting can be significant. These costs include cleaning, repairs, appliance upgrades, and advertising expenses.
Value of Good Tenants
While higher rent rates may attract tenants who can pay more, good tenants who pay their rent on time, look after the property, and renew their leases are gold. They can help landlords avoid re-letting costs and maintain a steady income stream.
Reasonable Rent
On the flip side, tenants should also be aware of what constitutes reasonable rent for the property they’re living in. A tenant who thinks they can get a considerable rent discount may not be a good prospect in the long run.
Setting rental rates is a balancing act that requires careful consideration of various factors. While higher rent rates may seem attractive, landlords should be mindful of the associated risks and costs. Similarly, tenants should know what constitutes reasonable rent and be prepared to pay it.
Balancing the maximisation of rental return with retaining a good tenant can be challenging for landlords. Fortunately, the professional property management team at McGrath Real Estate can show you how effective communication, tenant selection, legal compliance, and financial planning will maintain a successful tenancy while maximising your rental returns.
Phone our office on 8350 4200, or drop into 42 Brighton Road, Glenelg.