How Are Rental Prices Determined?
As the cost of everything from groceries to insurance has risen in the past few years, rental prices have increased, too. While inflation and interest rates impact many areas of consumer spending, the rental property market should be the primary factor in deciding how much rent to charge. Factors such as supply and demand, vacancy rates, and the availability of similar properties all influence rent prices. Keep reading for an overview of how rental prices are determined and what to consider when reviewing what to charge.
Assess the Market
The most significant influence on rental prices is the rental market itself. Prices may need to lower in areas with more vacant homes to attract tenants. Conversely, locations with fewer vacant homes may command a premium. Many city centres and regional areas face housing shortages, leading to elevated rental prices nationwide.
Market conditions play a significant role in rental prices. Ensuring the rent you charge reflects fair market value is crucial to attracting and retaining quality tenants. For instance, if you have a long-term tenant who takes good care of your property, significantly increasing their rent might cause them to move out in search of more affordable housing. In cases where the proposed increase is $50 to $100 per week, a couple of weeks of vacancy plus your property manager’s letting fee can negate any potential financial gain. Finding a balance is key to deriving value from your property while retaining great tenants.
Features of Your Home
The features of your home are another important consideration when determining how much rent to charge. Factors such as the age and condition of the property, recent updates to bathrooms and kitchens, fresh paintwork, and amenities like air conditioning and included appliances (e.g., fridges and clothes dryers) can all justify a higher rent.
Local Amenities
Your property’s location significantly impacts the rental price you can charge. Proximity to the CBD, shops, schools, and public transport, along with the overall safety and upkeep of the area, can make your property more desirable and allow for higher rent compared to similar properties in less connected regions.
Rental prices have garnered considerable media attention in recent months, and for good reason. Continuously monitoring the market to ensure your rental charges are fair is critical to growing wealth and attracting and retaining great tenants. If you’re unsure how much to charge for rent, please consult your property manager. They understand the local market and can help you determine a fair price.
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Please remember that this post does not provide financial or legal advice. Before making decisions, please speak with your expert financial and legal advisor.
