There is no denying the WA economy is tightening and this is reflected in the media and has been highlighted by increasing residential vacancy rates and lowering median rents across Perth.
At the end of 2015, the vacancy rate in Perth was up to 6% from 4.2% just twelve months prior, plus the weekly median house rent was down to $405 per week from $450 per week a year before. As of today (end of May 2016), there are almost 3,000 more rental properties on the market compared to the same time last year. Economists are also tipping rental growth in major cities across Australia to remain soft in 2016.
These figures are not meant to alarm investors, but they do highlight a tightening market whereby tenants are spoilt for choice and they can afford to pick and choose. It’s a simple case of supply and demand and when there are more rental properties on the market, rents come down and it becomes harder to find quality tenants.
A quality, long-term tenant is critical to the performance of any investment property and investors and property managers shouldn’t compromise just to lease a property. Choosing quality over quantity is the best option and outlined below are a few handy hints to help investors maximise rental income in a tightening market.
1. Be selective with your tenants
In a tighter rental market it is often harder to attract decent tenants but this doesn’t mean you should let your standards slip or accept tenants you don’t feel entirely comfortable with. A good property manager will be rigorous in their screening process which includes rental references, personal references and employment references. Social media can often provide some interesting insights too!
Although they are harder to assess, first time renters should never be discounted and it is always important to keep an open mind in a tighter market. Quality tenants are crucial to maximise your long-term rental returns so choose wisely.
2. Do what you can to retain existing tenants
If you have quality tenants living in your property already, it is in your best interests to do what you can to retain them rather than try to find new ones. Good tenants are often hard to come by, particularly in a tighter market and as the saying goes ‘better the devil you know’.
Sometimes it is worth negotiating on rent or introducing a few small incentives or tokens of appreciation to keep a good tenant. In a tighter market you should work with your tenant to negotiate a solution that suits you both, rather than try to dictate terms.
3. Be realistic with your rental expectations
Often prospective tenants looking for a rental property will know exactly what properties are available in their preferred suburbs and the current market rent. This is why it is important to be realistic.
Tenants will always be motivated by the presentation, location and features of a property but at the end of the day, if the price isn’t right, they will move on – particularly in a tighter market when they are spoilt for choice.
If your long-term tenants are moving out and you know the market has tightened, be realistic about reassessing your asking rent before you advertise the property. You don’t want to alienate potential tenants from the outset but pricing yourself out of the market.
Good property managers will help investors to understand the current market conditions and set realistic rental rates.
4. Enhance the offering
In an oversupplied market, it is important for your property to stand out from the competition and presentation is vital when showcasing your property to its full potential. You don’t want to go overboard but consider professional carpet cleaning, gardening services, a fresh coat of paint or some new window treatments prior to advertising if the property is looking a little tired. Professional photography also goes a long way towards showcasing the property at its best.
Aside from the physical presentation, you may also wish to upgrade your offering by giving tenants a little extra for their money such a week-free rent, a monthly garden clean-up, regular pool cleaning services, new appliances or any features you can think of that will add a little extra appeal.
5. Think with your head, not your heart
Too many investors are unable to take the emotion away from their day-to-day decision making process when it comes to their investment property and they still think with their heart, and not their heads.
That is why it is important for all investors to be objective and take a ‘business-like’ approach to their investment. Investors need to be realistic in a tighter market and put the day-to-day management of their asset in the hands of a skilled property manager.
If you would like to discuss the management of your investment property or if you are struggling to be objective in the current rental market, contact the Investor Assist Property Management team here.