Pitfall of over valuing your rental income – you get desperate tenants!

G&H Property Manager Melbourne helps you to accurately value your investment property

When you are new to investing in property you usually see yourself as invincible and are proud of your achievement. What most investors forget is that “tenants and others” don’t feel the same way. You want to collect rent from your property but no one else has the same love and attention to your property as you do. At the same time you want to make as much money as possible.

When you are new to investing in property you usually see yourself as invincible and are proud of your achievement. What most investors forget is that “tenants and others” don’t feel the same way. You want to collect rent from your property but no one else has the same love and attention to your property as you do. At the same time you want to make as much money as possible.

When your property is vacant the biggest decision you will need to make with your Property Manager Melbourne / Real Estate Agents Melbourne is how much rent you ask for. The worst thing you can do is let your emotions take place and assume your “piece of gold” is the best property in the area. A future tenant will see your property online first and they will usually compare yours with others based on only a few things. They are price, exact location (ie main roads, schools, shopping, coffee etc), number of bedrooms/bathrooms/living areas and this is how they judge your property. They will not look at it like their “home.” That is an emotional response that they may only feel after quite some time living there. Price will usually dictate their decision to whether or not come and see the property.

Setting the right price should be based on data from other similar properties that have rented recently in that area. This will always be a good place to start. This is easier said than done because most investors have some kind of emotional attachment and believe the rent should be more than what it is actually worth. In the long run this is most likely counter productive (even if you do rent it at the higher amount) for the astute investor.

Let’s pretend your investment property has just become vacant and you need to work with a Property Manager Melbourne to rent it out. You believe it should be rented at $450 per week and your property manager shows data of similar properties that have recently rented at $425 per week. You insist at $450 per week and they start their marketing campaign. The difference in price is $25 per week which is only $1300 per year. When a property is advertised at a price that doesn’t meet the market it usually sits unrented for a lot longer. I have rented a lot of properties and I would say it would take approximately 6 weeks longer on average. 6 weeks x $425 (missed rent) = $2550. In this scenario you are out of pocket $2550 – $1300 = $1250. Even if you do “fluke” your higher price quickly I still don’t think you are better off.

Properties in Australia and Real Estate in Melbourne particularly have a lot of people looking for property that struggle to find anything anywhere. This is because their credentials don’t meet the regular criteria Real Estate Agents Melbourneare looking for. Ie not enough income, poor references/no references, no savings etc. When you advertise your property above market value you often get these “desperate tenants” who are applying for many because they are struggling.

Don’t get me wrong in a lot of scenarios everyone is happy but I assure you in this situation the risk is a lot higher. This type of Tenant (in general) is a lot more likely to have late payments, take less care in the property and have a higher chance of not being able to afford it. You can get lucky in a lot of cases but if you are serious about developing a property portfolio you should be weary of this situation as the “law of averages” will come into play. The last thing any investor wants is a squatter that doesn’t pay, trashes the house, takes 6 months, police and a VCAT order to kick them out. Trust me I know!

If you ever have problems with a tenant this is when a good Property Manager in Melbourne is worth their weight in gold. If you have a poor Property Manager they will often have little experience in the situation and only prolong the outcome. I highly recommend avoiding the big agencies because their staff usually don’t have the knowledge to take on these tasks. A specialised Property Management Melbourne Company like G&H Property Group is the way to go because even when things go wrong they will know how to take care of the issue. A misunderstanding of processes in Property Management can delay things by months. Meanwhile the tenant is still in the house and taking little care because they know they are well past getting their bond back.

Property Management Melbourne

www.gandhpropertygroup.com.au