The Cost of Overpricing
Setting rent above the market in the hope of finding a tenant willing to pay more is a strategy that almost always backfires. Every week a property sits vacant because the rent is too high costs more in lost income than a modest reduction would have saved.
On a $450 per week property, two weeks of vacancy costs $900. A reduction of $20 per week recouped over a year costs only about $1,000. The difference is negligible and the vacancy was avoidable. Beyond the direct cost, an overpriced property tends to attract applicants who are either desperate or optimistic about their ability to meet the payments.
A Proper Comparative Market Analysis
Setting rent requires a genuine analysis of what comparable properties are currently achieving in the same suburb. Comparable means similar in size, configuration, condition, and amenities. A four-bedroom house in Kirwan with air conditioning and a garage should not be priced against a three-bedroom house without those features.
Use current listings and recent leasing data, not advertised prices from three months ago. Markets move and what achieved a certain rent in the previous season may not reflect what tenants will accept today.
Adjusting When the Market Shifts
A property that was correctly priced at the start of a lease may be above or below market when the lease comes up for renewal. The direction of the adjustment should follow the market, not the landlord's preference.
A good tenant paying slightly below peak market rent is almost always preferable to an empty property while you search for a tenant willing to pay more.
The Rental Managers provides up-to-date market assessments for managed properties. If you are unsure where your property currently sits, contact us for a review.
