Dropping the rent

Tizzy

Tizzy

I manage my own rental and 6 months ago I rented our new build for $400 pw. Now that tenant is able to move to his parents and rent their house cheaply because they've retired elsewhere and he has bought a block and is building.

I'm thinking, we've had some interest rates cuts so wouldn't it be better to drop the rent by $25 pw and get more applicants? There's a couple of other similar local properties being advertised at $375 and I don't want to wait ages for a tenant. What do you think?
 
I think it may have dropped a bit from 6 months ago. Mainly because a couple of extra places are available for rent now that couldn't be sold.
 
House is in Hocking.

I've checked the going rate for Ashby & Tapping also, they seem to be asking slightly more for similar houses.
 
Hi Tizzy

Our exec rental has been on a twelve month lease @ $450 per week, with the tenant due to leave this coming Saturday.

The property manager rang yesterday to say that she had an application in for $460 per week, commencing the Monday after the vacancy.

If your property is good quality ie value for money, I wouldn't be in too much of a hurry to drop the rent. Better to try for a 'reasonable' time at the same rental as the outgoing tenant. You can drop if need be, or if the rent is negotiated. Our pm advertised for two weeks at $470 per week but had only minimal enquiry. With the property occupied, they weren't offering Open For Inspection during that time. At $460 there were two enquiries, two inspections, and one application. Done deal!

Interest rates have little to do with rental return. While the property is occupied is the time to advertise at the same rental, or at least advertise a rent range eg $380 - $420per week and see how you go.

Good luck!

Kristine
 
Thanks for that information Kristine.

You know what? I think I might have been a bit quick with the thought of dropping the rent. Today was the first ad and I've had 8 rental enquiries on my mobile!! So, now I'll just wait and see what transpires and who gets back to me for a viewing on saturday.

Unfortunately, I didn't get the opportunity to show people through with the tenant in situ. The tenants lease passed the 6 months mark, I couldn't reach him to confirm if he wanted another lease and when he did ring he gave 2 weeks notice and went out of town for most of the fortnight. Frustrating!
 
Hi boomtown what does afaik mean?

I didn't realise I could access the house within that two weeks without him being there. What form would you use? At that point I didn't know what the interior of the house would be like either so not sure I would have taken any one through without viewing the place myself first.
I served a non-payment of rent notice and an eviction notice all within the same 2 week time frame. Then 2 days before his final day he paid the overdue rent.
 
think of the types of people that wouldn't apply because they could afford $375 but definitely not $400. then think if that is who you want underpinning one of your largest assets. Personally I would put it at $400 and smile every time I look at the phone and it hasn't rung, because for every time it does ring you have not had to deal with a few lesser quality applicants
 
AUSPROP... said:
think of the types of people that wouldn't apply because they could afford $375 but definitely not $400. then think if that is who you want underpinning one of your largest assets. Personally I would put it at $400 and smile every time I look at the phone and it hasn't rung, because for every time it does ring you have not had to deal with a few lesser quality applicants
Click to expand...

not trying to start an argument but are you saying the difference between a good tenant and a derro tenant appearing on the next episode of today tonight is $25?

seems like a unusual way to look at things especially relative to Tizzy's suggested price and from what i am seeing on domain quite a good area.

Dropping rent is more a matter of whether or not you are happy to sustain that vacancy when there is no demand. When there is short fall to be covered, some rent is always better than no rent, and if you do get a tenant in at a lower rent, a tenant would rather pay a small rental increase some months down the track rather than move.

Another strategy i recently experienced. Although it was only a matter of $20, i feel it is still applicable.

I have a villa that i was happily renting for a minimum of $160pw, the last tenant was paying $170pw but moved out. The villa was advertised at $170pw but had no interest for 3 weeks. I told the agent to advertise it at $150pw, this generated interest and a tenant was secured at $160pw because the new tenant wanted to secure it over the other applicants.
 
Sorry to throw a spanner in the works but heres another angle someone made aware to me a while back. For every week your property is untenanted to gain a few bucks in rent that same property will have to work multiple weeks to make up the opportunity lossed.

eg: Lets assume that there is a tennant willing to pay $375pw right now but you will have to advertise an extra week to secure $400pw. Because you skipped that 1 week in rental to possibly gain an extra $25 you will not see the benefit of this extra rental gain until after 15 weeks. Now if you had to wait 2 weeks to get $400 that means the gain wont be seen until after 30 weeks, but if your tennant was only on a 6 month (26 week) lease you will have come out in the red.

Its an interesting concept and a new way of looking at things. But basically it can be boiled down to:

26 weeks @ $375 = $9750 vs
25 weeks @ $400 = $10,000
24 weeks @ $400 = $9600

Just do the numbers and see which one is suitable to your market and your comfortable with.
 
Thank you all for your input and advice, I've got a few things to think about. It will be interesting to see who actually submits an application now.

The ad gets repeated tomorrow so I can't really give the address out and say drive by because I've fixed an open house for noon. So we'll see how many turn up ( and apply).
 
Ive been aggressive in increasing rents and have not had a day in vacancy. For me the cost of not increasing the rent would have been significant.
 
hI Tizzy, I totally agree with Ausprops and Boomtowns comments. Having the lowest rent in the area does attract the lowest tenant. There is currently a huge demand for rental properties so take the $$ while you can as it may change.
 
You must log in or register to reply here.

Similar threads

zimby
Yay or Nay
Replies
11
Views
2K
Nattl3s
N
dex
are St Kilda rentals soft now.. should I drop my rent?
Replies
6
Views
996
Spades
Spades
E
How to manage a PM??
Replies
2
Views
1K
Elke
E
K
Rent Increases Brisbane <10km Suburbs
Replies
17
Views
3K
Ed Barton
E
C
How to deal with property managers ?
Replies
10
Views
2K
chibs
C
Back
Top