Comparing similar properties vs Rent ...do tenants consider the extras or only the $?

[pipsal]

In my own experience of going along to inspections and trying to find suitable rental properties, rental cost was never the ultimate deciding factor. We looked at properties up to the maximum range we were prepared to spend, location, bedrooms, etc...and if something was found cheaper and it suited, then that was a bonus. Each property had its advantages or disadvantages, and these were weighed against the rent and a decision made based on that - and if one had something about it we particularly liked, we were happy to pay a bit extra a week for it ($10-30). We never looked at only one property, even if we loved it - we checked the others first to be sure of our decision. Is this not fairly standard? Do tenants just look at the first place they go to and if it suits, take it, even if there other properties around?

Assuming there were two 3 bed houses, a few streets apart and both are renovated to a similar standard. When compared, the differences are basically as follows:
- #1 has ensuite, but #2 has airconditioning.
- #1 'Villaworld' plan home (on small, 350sqm block), #2 70's large home (600+sqm block)
- #1 SLUG and a carport, #2 SLUG and 6mx3m shed (with access from road)
- #2 large covered outdoor entertainment area
- #2 cost of lawn mowing/garden maintenence included in rent

Obviously everyone is different, but would these differences between the properties make any difference to tenants (other than myself!)? Curious because my PM tried to essentially compare properties 'apples with apples' - with the difference simply being "aircon vs extra bathroom", thus I should lower to the same rent.

I don't see that the two properties can be compared that simply, and everyone else I've run this past thinks it's ridiculous - but maybe it's not. Perhaps an outdoor area is not of any value. Previous PM's have told me that a lot of tenants 'are basically lazy', and the one thing they have to go back and have remedied after inspections is the yard, so including mowing/garden is generally a huge draw card that they are happy to pay a bit extra for. It certainly has been for me in the past, but maybe that was just lucky? Apparently it is only myself and the agent that consider these differences in the properties; prospective tenants just put a price range into the search engine and don't look above that range, so I've been advised to drop rent $20 to match #1 (not to drop incl. gardening though?!).

Dropping rent doesn't bother me, nor does the property staying vacant for a while, but I am curious about how much tenants generally care about the 'extra' things, or if they just care about the number of bedrooms/bathrooms/garages, and whether it is reasonable to ask higher rent....because I might need to reconsider my thoughts regarding good options for the purchase of IP2!

 

[Lovehouses]

Twenty years ago when I was young and renting I would consider the cost of the rent first, and then if I liked the place I would rent it. I never looked at a rented place as long term. The cheaper the better, then I could one day have enough to buy my own place. I never considered heating or airconditioning. If it had enough bedrooms to accommodate me and felt inviting then I rented it. But I guess not all tenants think short-term.

 

[wylie]

I also struggle to compare "apples with apples". What I've found from over 35 years of being a landlord is that over the past ten years, we've chosen to add dishwashers and air-conditioning and decks to any property we hold.

Tenants are getting fussier and fussier and we lost tenants due to not having a deck on some houses. I've found over the past five or so years, that a dishwasher, air-conditioning and decks are now pretty much "must haves" rather than "good to have" that they were ten years ago.

I'm quite sure we could rent our places without having added these things, but we would not be getting good rent.

We also decided probably eight years ago to include mowing in all rents. We were tired of having tenants leave the grass long, and we knew many people in the streets our houses were in, through school. I didn't want to have the only house in the street with long grass. It was a big issue for a few houses we had on large blocks, and without including the mowing, I know we would have lost prospective tenants.

I think we sometimes don't charge enough extra for the mowing, and think that many tenants do compare "apples with apples" as far as the bedrooms, bathrooms, air-con etc goes, but don't factor in the "free" mowing, or forget that the mowing cost would be $15 per week roughly, spread over 52 weeks. Our mowing bills come to something like $700 per year per house. My brother does the mowing and he is cheaper than the franchise operations for us.

So, regarding mowing, rather than price our houses $20 higher than comparable houses, I've found tenants don't "see" the extra value so we tend to absorb the cost really. I've also never found tenants rushing to our houses due to us allowing pets, like many people report happens down south. Maybe it is a Brisbane thing. A dog outside in Brisbane isn't going to freeze, but a dog outside in Melbourne might be a bigger issue, so perhaps allowing dogs in IPs in Brisbane isn't as attractive as in a colder climate.

I could go mad trying to work out how a renter thinks, so I don't bother too much. I just offer the best I can manage and as a self-managing landlord, I have great relationships with our tenants. I believe that is a huge reason they stay on longer. They are not dealing with a middleman.

 

[Rentwithpets]

Every tenant thinks differently and has different priorities. Some people are just after a cheap home as they are not planning to rent for long. Others want all the luxuries like dishwashers, decks and air-conditioning...they are motivated to stay longer if the home is comfortable. Free lawnmowing is a wonderful idea, definitely add value for the tenant when you can offer it.

Asking tenants what they want is good market research.
My opinion is to offer different options with price differentials to cater to different types of tenants that want different things. eg on Rent With Pets I've created price differential options for furnished, unfurnished, with and without pets. The same price differential concepts can be applied for airconditioning and lawn mowing.

It is like selling the same car to appeal to different buyers - eg base model with no bells and whistles, and a higher model with reversing camera/GPS/self parking for $$$ more.

 

[Lil Skater]

I agree with RWP.

Everyone is different, however there's certain things that, in theory, should place a higher rent on a property. Ie. Ensuite vs A/C. A/C is great, but personally I'd prefer an ensuite. However this isn't the case for everyone.

For me, I would pay more for gardening included, as I'm pretty useless at gardening.

 

[MichaelGilbert]

I like all the above points.

Wylie. I can really relate to your post.
I think one of the reasons you have great tenants is because great tenants are attracted by these Decks, Dishwashers and Air conditioning at each of your properties. I like your thinking.

I find Lawn mowing a difficult one, I find it costs more than what a typical tenant is willing to pay for it (at cost) so it generally does not add enough value as far as a tenant goes but If I had a LL who was concerned about the lawns, I would not hesitate in automatically including it in the rent.


I think its clear it depends on the individual (everyone is different) and that's why I like the options idea from RWP.
I would display the cheapest price possible on the ad (to get people interested enough to open the and read the ad). EG $350. Then in the description put down:
Lawn mowing included for an extra $15 per week.
Air Condition included for an extra $10 per week.
etc etc.

However I've only done this a handful of times so can't really comment on if it works from my own experience.