Purchasing a property to put on the rental market can be an exciting time but that excitement can quickly turn to anxiety and stress if the property remains vacant.
Let’s look at an example of the dramatic effects that extended vacancy has on your rental returns. The property you have is worth $475 per week but you want $500 per week and it takes you 4 weeks to accept that it is overpriced. You drop the price to $475 and tenants are found quickly but not before you have lost $1900 worth of income chasing a higher rent. If the tenants have only signed a 6 month lease then the effective rental return for that lease period has dropped dramatically to only $402 per week.
Setting the correct rental price for your property is essential if you wish to find tenants quickly. If you are going to use a real estate agency to manage your property, then get a CMA (Comparative Market Analysis) from multiple agencies. These reports are an in-depth analysis of your homes worth on the rental market and it compares your property with other similar properties that have recently been rented. Be sure to question an agent that has given you an unusually high rental estimate as they may be using this as a strategy to get you to sign the property management agreement with them.
Matching your expectations to reality can sometimes be difficult but it is important to not let your emotions get involved. As the property is an investment ensure you keep your decisions businesslike. Don’t base your rental asking price around your mortgage repayments and remember that the market is most qualified to set the rental price.