Most investors agree that successful ownership of residential rental property is all about maximising long term net income.
?Novice investors and property managers often simplify what is a complex interplay of forces and focus on the amount of rent being achieved right now,? Monika Bonet, Principal of Raine & Horne Glenelg said. ?Because tenant harmony is a crucial part of the income equation, most experts agree that setting rent at 95% of market value usually achieves a higher income long-term than holding out for a 100% or more. Tenants paying top dollar are more likely to be finicky about the standard of the property, and make more demands for repairs and improvements. Furthermore they tend to start looking around to see what else is available for the money and move on if they find better value.?
Ms. Bonet said that the more often a property is vacant, especially if the advertised rent is high, the more chance there is of vacancy and loss of income.
?Even a few weeks vacancy per year can significantly reduce the investor?s return, thereby requiring an even higher rent to make up for it and setting a negative pattern in motion,? Ms. Bonet said.
According to Ms. Bonet a related factor that is often poorly handled by novice investors is the market rent review.
?Property investment managers carry out market rent reviews on a regular basis and the rents are raised according to supply and demand,? Ms. Bonet said. ?Novice investors often think the best approach to raising the rent is to make frequent small increases, but these are seen by tenants as penny pinching and lead to disharmony, increased demands for repairs and higher vacancy over the long-term. Experts say that in most cases rent increases should occur when market indicators show that a 5% increase is warranted.?
Ms. Bonet said that experienced property managers report that the most stable income and long term optimum return is gained by investors who follow the advice of the experts they have selected to manage their investments.
This blog post is brought to you by Raine & Horne Glenelg, your Glenelg Real Estate Agents and Glenelg Property Management Experts.
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