When is the best time to increase rental return?
Rental return and when to increase is something landlords need to think about when the time comes to offer your current tenants a lease renewal.
While it can be tempting to increase the weekly rent for your tenants, there are market forces you need to consider when determining if it’s suitable to increase the rental price for your properties.
If you’ve recently had to spend money on your property, this isn’t a strong reason to increase your rental fee. This is because property-specific costs don’t reflect the wider market which is what creates the basis for raising prices in the first place. For example, an expensive repair to plumbing or structural elements of the property isn’t a wider market factor such as vacancy rates which is a market force. The warmer months in Australia are the most popular time for tenants to look for a new property.
The new year, in particular, is popular so if you’re listing one of your properties for rent, this could be an excellent time to increase the weekly rental price for your properties. Just beware if you’re increasing the rent with current tenants, you have to be prepared for the possibility that they may find another property.
Next, consider how your specific house or unit is different from other properties in the area. How attractive is it to potential tenants? Does it have more space? Has it recently been renovated, compared to other buildings in the area?
These are also important questions to ask. If your place is better or worse than the competition, you’ll need to adjust your price accordingly.
When you decide on increasing the rental price of your property, weigh up the cost of vacancy against the rental increase. As an example, if your property is currently rented at $750 per week to rent and you’re considering a $10 increase to $760 per week with the current tenants, do your calculations. Just one week of vacancy will eliminate the potential gains from a rent increase and leave you out of pocket by $230 compared to if you’d kept the rental price the same.
There are a lot of factors you need to consider when you’re deciding whether to increase the rental price of your property. The most important things to consider are market factors such as vacancy rates and market performance as these are things that other landlords will consider too.
If you have any questions, or need clarification on any of the above, please contact Anna Marten, our Head of Property Management, on 9651 1666 or anna@guardianrealty.com.au.
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