How to Set Your Rent Correctly and How to Increase It If You Are Undercharging!
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When it comes to setting the rent of your property, there are really only two ways to go about it.
The first option, which is quick and easy, is to seek expert advice from a property management company such as Clarke Group Property Management, and have them complete a rental appraisal for you. The rental appraisal should highlight key selling points for your property that tenants will find attractive, and a rent range you can expect to get for your property.
The second option is to do it yourself. If you plan on doing this without assistance, the first thing you should do is Google ‘Tenancy Services Market Rent’ and head over to tenancy.govt.nz/rent-bond-and-bills/market-rent/. Here you can find out what the weekly rent is for properties in your area with similar specs to yours. But don’t stop there – always compare using sites such as trademe.co.nzor realestate.co.nzto see what properties similar to yours are being advertised for on the market, so you can work out a reasonable rental figure.
As an example, we recently let a property in South Auckland area and according to the stats from tenancy services, the highest range for properties in the area is $555. But we rented this property out for $620.
That’s a difference of $65 a week!
This is because the market is constantly changing and your property has its own unique features that may increase or decrease its value when compared to similar properties available. For example, this property was packed with extra goodies such as a heat pump, central heating, conservatory, and a massive outdoor area – which all add value and could justify a higher rent. This is why you should never set your rent purely off the stats. They are not always up-to-date.
The key difference between using a property management company (like CGPM) and doing it yourself, is that a good property management team will have strong property experience, know the current demand, use software analytic tools and their knowledge of rent in the area to determine the most accurate figure. And a good property management company will be able to provide you with a rental appraisal for your property that very same day.
Once you have obtained a rental appraisal, and discover that you could potentially be under-renting your property, here’s how you can go about increasing the rent. As per Tenancy law, you can legally increase the rent once every 180 days, or within the first six months of a new tenancy beginning. Any increase must be forewarned with 60 days’ written notice to the Tenant, and at a fair market level. This notice can be sent before the end of the 180 days is over, as long as you give the notice once 120 days have passed. Please keep in mind that if the tenants have signed a fixed term agreement, there needs to be a specific clause within the agreement conditions stating that the rent can be increased during the fixed term.
On paper, this seems easy enough. However when it comes to actually passing this information to tenants, if done incorrectly, they may choose to hand in their notice to end the tenancy. It’s good practice to provide tenants with a justification for a rent increase, and a document such as a rental appraisal will help eliminate the fear of losing good tenants in the process. A rental appraisal from a reputable company that you can show your tenants will give you the reassurance and confidence to increase your rent, knowing you have received expert advice.
Renting out your property at market rent is advisable, so if you would like a FREE rental appraisal for an investment property you own or are thinking about buying in Auckland, please give us a call today on 021 0240 5380 or click here.
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