How to set the right rental price

Lesotho Times - - Property -

IT goes with­out say­ing that an as­tute prop­erty in­vestor will want to make a fair re­turn on their rental prop­erty in­vest­ment. In or­der to do this, the prop­erty in­vestor will need to be­gin by es­tab­lish­ing an ac­cu­rate rental value to charge their ten­ants.

This is ac­cord­ing to Grant Rea, RE/MAX Liv­ing Rental Spe­cial­ist, who says when the prop­erty in­vestor has an ac­cu­rate mar­ket­based rental price, they will at­tract a good cal­i­bre, long-term ten­ant.

Rea says the com­bi­na­tion of a fair mar­ket-re­lated rental price and at­tract­ing a re­spon­si­ble ten­ant is what will guar­an­tee the con­sis­tent long-term re­turn from the rental prop­erty in­vest­ment.

Adrian Goslett, re­gional di­rec­tor and CEO of RE/MAX of South­ern Africa, says whether set­ting the ask­ing price to sell a prop­erty or let­ting one out, find­ing the right price is highly im­por­tant to en­sure that the prop­erty ap­peals to the right buyer or ten­ant.

Rea says the rental prices are largely driven by sup­ply and de­mand.

“There is also the pos­si­bil­ity that over­pric­ing the rental may at­tract ques­tion­able ten­ants who have been de­nied an op­por­tu­nity to rent else­where. Many land­lords who are only in­tent on se­cur­ing the max­i­mum rental may ig­nore other warn­ing signs about a ten­ant and forego ad­e­quate screen­ing of ten­ants if they hap­pen to have the fi­nan­cial means to se­cure the rental.”

He says land­lords should be aware that ten­ants are far bet­ter equipped with in­for­ma­tion and op­tions in their hunt for the right rental prop­erty than ever be­fore, so they are choos­ing more wisely and cau­tiously.

So how does one es­tab­lish a fair mar­ket re­lated rental price for their prop­erty?

Rea shares some guide­lines for set­ting the right rental price:

1. Get an es­ti­mate Ob­tain a com­par­a­tive es­ti­mate by an es­tab­lished lo­cal rental agent who has a good sense of the mar­ket and de­mand in the par­tic­u­lar area.

2. Es­tab­lish value Es­tab­lish the mar­ket-re­lated sales value of the prop­erty. Nat­u­rally some sub­urbs have higher lev­els of de­mand and will ob­tain higher rental val­ues, but this is a fair guide for a rea­son­able prop­erty with rea­son­able fin­ishes, says Rea.

3. Com­pare of­fer­ings Do a com­par­i­son of sim­i­lar of­fer­ings on­line and re­mem­ber that the bet­ter value units will al­ways rent first. A pri­vate land­lord can start their search on­line and delve into some of the busiest on­line des­ti­na­tions where av­er­age ten­ants will start their search as well.

Be aware of com­par­ing ‘ ask­ing’ or ‘ listed’ prices, as th­ese are of­ten over­in­flated, in the hope that th­ese units will achieve more than the av­er­age. How­ever, rentals are of­ten con­cluded at lower fig­ures.

4. Price fairly Of­fer a fair and rea­son­able rent to at­tract fair and rea­son­able ten­ants - if the prop­erty in­vestor is re­ceiv­ing a dis­mal re­sponse on­line and a mere hand­ful of un­mo­ti­vated ten­ants ar­rive at the view­ing, it is safe to say that the rental of­fer­ing is not rep­re­sent­ing value, he says.

5. Es­tab­lish what you of­fer ten­ants De­ter­mine if the prop­erty has what ten­ants are look­ing for: - Good, safe sub­urb (lo­ca­tion) - Gen­er­ous, clean spa­ces with am­ple cup­board space - Safe park­ing - Bal­cony or a space to go out­side - Views - Mod­ern kitchens and bath­rooms - A shower op­tion - Plumb­ing for ‘wet’ ap­pli­ances

6. Do re­search Do your home­work –– ob­tain a se­cond opin­ion from a pro­fes­sional.

What if the cur­rent rental is well below the ex­pected mar­ket re­lated rental?

Rea says there is no law re­strict­ing the land­lord from of­fer­ing fair no­tice to their ten­ant within 40 to 80 days of the end of the ten­ancy that the rental amount will be in­creas­ing.

He says a myth ex­ists that 10 per­cent is the max­i­mum ac­cept­able an­nual rental es­ca­la­tion, but this is to­tally in­ac­cu­rate.

“Un­less a pro­vi­sion has been made within the lease agree­ment re­fer­ring to the max­i­mum an­nual es­ca­la­tion, and pro­vided the land­lord is be­ing rea­son­able and can show due dili­gence in es­tab­lish­ing the new rental price, there should be no rea­son why the land­lord can­not in­crease the rent to get in line with a mar­ket-re­lated level, even if this means in­creas­ing the rent by more than 10 per­cent,” says Rea. – Prop­erty24.

Of­fer a fair and rea­son­able rent to at­tract fair and rea­son­able ten­ants.

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