Monthly Archives: April 2016

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Dealing with a rent reduction

By | Rental Pricing | No Comments

It may be news to some investors that we are on the cusp of an over supply in the Melbourne apartment market, in fact I wrote about the impact that current developments in the CBD in particular would have on investments almost 12 months ago and unfortunately this prediction is coming to fruition and the effect it is starting to take hold of some properties.

Tenants have an abundance of properties to choose from, they apply for many properties when looking and when approved, select the best value property available. In some cases sitting tenants are pushing back on rent increases.

An important fact of property investing is that the market determines what the rent should be, it always has and always will be a case of supply and demand. Overall though, its not just supply and demand that impacts the rental market, the economy plays an important part but it also can be the time of year. If you lease a property out in peak season during summer months for a six month term, then try and lease the same property out during winter it is a very different market. You may get $20 a week more during a summer market than when you are trying to lease it during winter. The reality is not many people feel like viewing properties on a cold, rainy day or moving house when there is a good chance their belongings might get wet in the process.

We need to keep in mind that some rent is better then no rent, this is sometimes hard to remember when looking at weekly rental amounts. However lets say your asking $500 a week rent, and the market is determining $480 per week, if you have your property vacant for three weeks waiting for someone at that price point you are already worse off on a per annum basis. Not to mention you might have to wait another week or two for a new Tenant to move in.

Leasing properties quickly and minimising vacancy periods are achievable when you price the property right to begin with, too often we hear people say ‘lets try for X amount per week and wait and see’ that waiting usually results in the price being reduced and losing minimum a week or two weeks rental in the process. Looking at it from this perspective can you help you deal with the reduced rental.

Finally what goes around comes around, if you have had your property for a while you will know that you get some years of great returns and some years of not so great returns, this is all part of investing in property, its a long term game and those with the ability to successfully navigate the tough times reap the rewards in future.

If you have any questions or thoughts on this topic please feel free to contact us below.