Setting your rental rate right
Category Top Property Tips
So you are thinking about investing in a rental property, or perhaps you already have a property that you would like to start renting out?
One of the most important things that you would want to know, is how much rent you can expect to earn from your property.
Ensuring that your property is always occupied by a good tenant who looks after your most valuable asset is the most important thing to ensuring that you earn your rental income each month.
Setting the monthly rental rate of your property is a function of the market rentals in your area. You should therefore look at other properties that are available for rent and how much they are being let for, not just how much they are being advertised for.
Next, you should do a comparison in terms of the finishes, the style and what each property offers. You can then determine what the appropriate rental rate for your property will be.
When it comes to setting the rental rate for your property, you should also be aware of the current market conditions. When the economy is booming, landlords can earn much higher rentals, but when the economy is down and tenants are facing financial pressure, it is best to consider reducing your rental to keep good tenants.
If there is an oversupply of stock on the market, it may also be necessary to bring your rental rate down a bit to fill your property.
On the other hand, if there is an increase in demand, it will allow you to maximise the potential rental that you can achieve for your property.
Rental rates usually increase annually, and we refer to this as an escalation in the rental rate which is generally in keeping with the prevailing inflation rate. This is usually included in the rental agreement.
When it comes to a rental property investment, it is vital that you set your rental rate at a level that will keep it occupied to maximise the returns on your investment.
Rental property has become complex and there are many laws and regulations to be aware of. Your rental agreement will now need to be in writing and include many provisions.
This is just one of the many reasons why your best bet is to work with a skilled and experienced rental agent who will have the legal and local market knowledge and can help you set the correct monthly rate. Setting it too high will deter prospective tenants, but setting it at the correct rate, will mean that you can earn good returns on your asset.
Author: Gina Meintjes