Inner West Property Manager Ian Comyns has warned landlords against overpricing their rental properties, stating there are significant risks posed by holding out for an extra $10 per week.
Comnys, who is the licensee of Exchange Property Sales and Management in Sydney, says that while vacancy rates in most capital cities are far below the balanced market rate of 3% and forecasters warning of a crisis in rental accommodation, holding out for an extra $10 or $20 week can mean a property stays vacant for longer than it should, and comes at a significant cost to landlords.
Comyns highlights five risks landlords face by setting their rent too high:
- As the asking rent inches above market, the number of enquiries and applications diminish and eventually disappear. Sometimes the inch is a matter of $10 a week.
- The quality of applicants drops as only those who are unsuccessful elsewhere apply. While these ‘desperados’ will often be more willing to pay more to secure the property, and landlords may end up with a ‘fly-by-nighter’ instead of a potential stable, long-term high quality tenant.
- When the market softens, tenants who are paying premium rent are more likely to move to save more money, and short-term tenancies result in higher leasing costs and more wear and tear on the property.
- The vacant property sits on the market for too long.
Comyns says that for every week that a property is vacant, annual returns will be reduced by 2%, very quickly eating into profit and causing a direct, otherwise unnecessary loss.
Setting the right rent for a property should be a balancing act of how much of an increase can be achieved without leaving the property vacant for too long.
Comyns relies on the following four indicators to assess whether a rental property is priced to market:
- The number of page views on the internet that a property is attracting
- The number of enquiries made about the property
- The number of people attending open inspections or requesting private viewings.
- The number of applications in proportion to the people viewing the property.
To state the obvious, if there are no tenancy applications forthcoming, the property will sit vacant.
Exchange Property Sales & Management is a boutique Inner West property sales and management agency specializing in maximizing the sales and leasing potential of properties. Landlords wanting to read more about the dangers of overpricing can view a case study on the topic or download a free landlord management kit from the Exchange website today.