When do we start to worry?

Hi there,
We're new investors - our first IP settled last Thursday. The agent has held two open for inspections - one last Wednesday and one on Saturday. A couple of sets of people through each time, but no applications as yet.
It's a 2 bedroom villa unit in Melbourne's inner-west, handy to shops, transport etc, and very tidy. I mean, it passes the ''would I live in it'' test, which I know is not everything.
The asking rent is $320 a week. I know there's another one in the block through the same agent that was rented in May last year for $300 a week, so I think the rent's probably at the high end of about-right.
But, given our nervousness as new investors, we'd just like to see someone in there, helping to pay the bills. Hence my question - when do we start to worry and consider dropping the rent? There's another open scheduled for tomorrow and then, I assume, also Saturday coming. I'd like to see an application by about then. But perhaps I'm panicking early?
TIA folks
 
Hi there,
We're new investors - our first IP settled last Thursday. The agent has held two open for inspections - one last Wednesday and one on Saturday. A couple of sets of people through each time, but no applications as yet.
It's a 2 bedroom villa unit in Melbourne's inner-west, handy to shops, transport etc, and very tidy. I mean, it passes the ''would I live in it'' test, which I know is not everything.
The asking rent is $320 a week. I know there's another one in the block through the same agent that was rented in May last year for $300 a week, so I think the rent's probably at the high end of about-right.
But, given our nervousness as new investors, we'd just like to see someone in there, helping to pay the bills. Hence my question - when do we start to worry and consider dropping the rent? There's another open scheduled for tomorrow and then, I assume, also Saturday coming. I'd like to see an application by about then. But perhaps I'm panicking early?
TIA folks

Hi Tuppence,

Congratulations on having your first IP settle last Thursday.

It's natural to feel anxious when you have an IP empty and are wanting to release it asap. Given that you have only had 2 inspections, (one being on a Wednesday, and one on a Saturday), I'd be inclined to wait until after the inspection this Saturday before considering dropping the asking price. I'd also consult with the agent too, to see whether they think this would help - but only after the next inspection if there are no applications.

Without knowing the area at all, how does your asking price compare with similar units in the area? Are there many similar properties for rent at the moment? If there are, work out what they are asking for rent, and if you don't receive any applications after the next inspection, you may consider dropping the asking price slightly.

It's also important to get the right tenant into your property. This may take a little while - but you will benefit from this in the long term.

All the best with it.

Regards Jason.
 
Hey,

Congrats on your first IP.

My wife and I went through the same nervous stage. It was our first IP, we had two open houses, no applications and a mortgage to cover with no rent coming in :(

After a couple of weeks, we dropped the rent by $5. At the next open for inspection, there were three applications :)

Dropping the rent by $5 probably made it more attractive because there was a cluster of competing properties advertised for the same rent. Dropping it by the measly $5 under-cut the competitors and probably appeared to represent better value.

I guess you get to the point where you have to think....do I drop the rent by say $10 and lose out on the extra $520 a year (but get someone in quicker) or hold off until someone pays the asking price (which means it might be vacant for longer - with no rent coming in).

A lower price may also result in more potential tennants to choose from, which is always nice.

Cheers,

Jamie
 
I tend to reduce the advertised rent sooner rather than later. Every week it's vacant costs you $$$. A 3 week vacancy at $320 pw is effectively nearly $20 pw.
The rental market is very price sensitive. You can dick around with $5 reductions, or just soak it up, drop it, say $10 or $15 and rent it faster with, potentially, a larger pool of qualified enquiries to choose from.
 
Hi Tuppence,

I felt the same ! Twice ! The first we dropped the rent. The second got filled straight after.

Maybe speak to the agent at the end the next inpsection ?

But what do I know ?! I agree with Rob also, but Rob, would you drop the price after 2 open for inspections ? Tuppence has only had the property for under a week.

I'm looking forward to facing this again when I get my 3rd
 
Ok, first off, it has to be said: Well done! You've taken such an amazing and wonderful step and one that takes a lot more courage than most people think and that alone is highly commendable. So, awesome, well done :).

As for the rent situation, I think jingo was right when they said that it's important to get the right tenant in. This will save you the most money, time, energy, stress and resources in the long run. Ask anyone on here if they would've paid $1000 dollars to have avoided their worst tenants and they'd all say it would be a bargain, I'm sure.

I know no one has a crystal ball, but you can put the odds in your favour by being thorough and going through due diligence up front.

Rent wise, I'd use a cooking analogy: if you throw a frog into boiling water, it will jump out but if you put it in cold water and bring it to the boil, the frog will boil to death. Now I know that sounds pretty morbid or dark, but once it's tenanted with good tenants, then you can look at ways of doing things for them that helps increase the rent and that can make it win-win.

As for my opinion, I'd say that if you read a few of the property management threads, you'll soon realise that a teaspoon of prevention is far better than a pound of the cure. Not to trivialise your current hardships, but having bad tenants will only increase current hardships - not alleviate them.

Keep us posted :)
 
Thanks all for the encouragement and positive feedback. We have another open tonight, so I'm inclined to see what happens then and talk to the agent tomorrow if there's no good news, and see what she says about maybe dropping the rent by $10 a week. I know it's early days and I definitely do take on board what people say about getting the right tenant - I agree that that is paramount. However, when you have no tenant, finding one at all seems to take overall priority. If we don't like how they look when they apply, we can deal with that then.
It's funny. We've wanted to buy an investment property for ages and were looking and looking. We'd initially ruled this one out because we thought it would be too exe, but it kind of fell into our lap - even in Melbourne's hotter than hot auction market at the end of last year there were still poorly marketed properties with desperate vendors. We went to the auction and turned out to be the only people there.
So we got a pretty good deal, we feel. Maybe not an awesome one, but a good one. Buyers' remorse? I laughed in its face! Nervous nelly first-time would-be landlord? That's a different proposition.
Thanks again for the advice. (and I promise to keep you updated - I'll probably shout the news from the rooftops when someone does move in).
 
Hi there,
We're new investors - our first IP settled last Thursday. The agent has held two open for inspections - one last Wednesday and one on Saturday. A couple of sets of people through each time, but no applications as yet.
It's a 2 bedroom villa unit in Melbourne's inner-west, handy to shops, transport etc, and very tidy. I mean, it passes the ''would I live in it'' test, which I know is not everything.
The asking rent is $320 a week. I know there's another one in the block through the same agent that was rented in May last year for $300 a week, so I think the rent's probably at the high end of about-right.
But, given our nervousness as new investors, we'd just like to see someone in there, helping to pay the bills. Hence my question - when do we start to worry and consider dropping the rent? There's another open scheduled for tomorrow and then, I assume, also Saturday coming. I'd like to see an application by about then. But perhaps I'm panicking early?
TIA folks
One week is not a long time,i have been watching several houses, units, in my small local area,some of those houses have been vacant for over 6 weeks,some units for over 2 months,not a good way to run a property business,in life some things we have very little control over,while others
you have total control over,and renting is one you have total control,and as value is what people preceive it to be and nothing more,just drop the rent to meet the market,20 bucks less is nothing in the big scale of things..imho..willair..
 
Isn't January a slower month for rentals. I'd expect near the end of Jan to start picking up and a lot more enquiries coming through.
 
There is a bit to rent at the moment but, as I understand it, a lot of people shift in January - new jobs, new schools, uni, etc - so hopefully there's also a lot of people looking.
I spoke to the agent today and she did have one applicant. But, to cut a long story short, that person has also applied for about eight other properties and actually wants to live in the next (much trendier) suburb over. So we're going to rule them out and see how tonight's open goes and then Saturday's and then talk about a reduced rent next week if there's no luck.
cheers all.
 
I personally think 1 week is too early to drop the asking rent, and if the prospective tenants are that concerned about the $10-$20/week difference they would try to negotiate it when they apply. I had mine listed for $450/week just before xmas, that was a very slow period. Eventually signed with new tenants just yesterday. They tried to negotiate it down to $430, we settled for $440/week. Don't panic yet, just let the agent know you are willing to negotiate if someone is serious. Oh and congrats on your first IP!
 
My IP took about 3 weeks from 21 Dec (settlement date) to last Fri when the tenant moved in.

Perhaps, people have just started to come back from their long holidays? What did your PM advise?
 
PM said she thought the rent was probably ok. On the other hand, she has a similar place - in not as good a location and not quite as smart on the outside, although it is inside - that rents for $300 a week, and she says she can't get anyone for it. She said to wait until after tonight's open for inspection and Saturday's and decide next week if still no one is interested.
 
I personally do not believe in asking top dollar rent.

I would sooner have the choice of tenants rather than the extra $10 or $20 per week... as well as shorter vacancies between tenants

If someone came along and said they would rent your unit, you would jump at them, even if they were not exactly the tenant profile you desire.

I have seen some pretty awful tennants paying top dollar as my guess is they can't compete against better quality tennants for more reasonably priced properties.

Today I inspected a property that I thought was 10% over rented. At least 8 people living in this 5 bed house. Chickens running all over the back yard, with chicken manure everywhere; the house was looking tired, the pool was not well maintained.

Just some thoughts.

cheers

RightValue
 
If someone came along and said they would rent your unit, you would jump at them, even if they were not exactly the tenant profile you desire.

I think this is it in a nutshell, at least for us at this point. I think we'll review the situation on Monday (or maybe Wednesday, as I've just remembered the long weekend). If we have no definite applicants by then, a $10 drop in rent might be in order. That will be at least the 25th, if not the 27th - so two weeks of scouting for tenants.
Thanks again for the advice, thoughts - and the congratulations:D. Much appreciated.
 
Hi Tuppence,

Congrats on your IP. :)

As mentioned, a week is not long, but your agent should be getting some sort of feedback from the people she is taking through.

Do your own research and see what else is for rent for your $ in your area, not just your building.

Your unit will be the last to go if it is in a slightly higher range, you can allmost bet on it.

I would drop the price if you need it rented and are asking an above average rent.

Regards JO
 
hiya

I started to get worried at about week 2.
My ad came online 22nd November at $240. Put the rent down $20 on the
9th December. Got an application on the 21st December. Leased from January 5 as she wanted to wait till after christmas to move in.

I am happy with my decision to drop the rent. It worked out well for me. Lots of other properties are still vacant nearby at around the $220 - $240 mark (and have been for months) and mine is leased!! Very happy.

Are you competing against similar types of properties in the same price range? If you want someone in there ASAP then you might have to drop your asking price. You can always increase it later on once the tenant is nice and settled.

Good luck! :)
 
That's what we did when we completed renovations to an old house and turned it into 11 furnished bachelor suites. It was available in an odd time of year.We had all units under market rent, just to have the place filled.We increased the rent for all new coming tenants, or for their second year of staying with us.
We still don't always increase the rent. We would rather be full.We have managed with very few problems, and even fewer vacancies.

Worked out great.
 
I talked to the agent late last week, and she thinks the rent is about right. We had a great application last week, from a young couple with very good references. But they didn't want it until February 25 - too long, we agreed. So there was another open on Saturday. The PM has a long weekend and will be back in the office on Wednesday - I'll talk to her then and see where we go.
But that's two applicants in two weeks - it's just that both had ''issues'' - so hopefully we're on the right track. Otherwise, we will drop the asking rent pretty soon I think. I definitely agree with what others have said here - would rather have someone in it to get us started and then look at raising the rent later or next year.
cheers all.
 
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