Why Higher Rent May Not Equal Higher Income


Most experienced investors understand that $500 a week for fifty-two weeks a year means more money in their pocket than $550 a week with several weeks vacancy during the year. So if maximising income from rental property investment comes from keeping their properties occupied, why do some landlords charge such high rents that their tenants move on whenever they get the chance and new tenants are slow to move in?


It is a fact of life that some investors fail to see the big picture and only look at the money in their pocket ‘right now’. They are blind to the possibility of rent loss down the track and don’t see that they might create dissatisfied tenants who move on when they find a better value option, thereby creating a cycle of high turnover and increased vacancy.



The problems don’t stop there…

Investors whose properties are ‘good value’ get more enquiry and can afford to be more selective when deciding who will rent their property, while those asking over-priced rents get fewer and less well-referenced applicants. Furthermore, if a property stays empty because the rent is too high, owners can get desperate enough to overlook a tenant’s patchy references; in the effort to get the highest income, they make themselves more likely to get less because poor references could mean greater likelihood of getting behind with the rent.



Don’t be Afraid to Ask for Advice

New investors can avoid a lot of common errors by making use of the expertise of their managing real estate agent. Many novice investors don’t think of asking their property managing agent’s advice until something goes wrong. Investors who do their homework and tell their agent up front what their needs are find it much easier to keep abreast of what’s happening and avoid confusion.



Comprehensive Reporting 

Most experienced investors ask their agent to provide a monthly statement of all income and expenses with cheques banked directly into the owner’s account. Most also ask for an annual written report of state of repair (internal and external) and cleanliness, as well as a mid-year written kerbside report of state of repair and cleanliness. You should also receive a six-monthly written report of the current rental value and the local area vacancy rate, along with an annual written report of the current reasonable selling price of the property.



Inspect for Wear & Tear  

Owners should carry out an internal inspection of the property themselves once every two years so that they can visualise its state of wear and tear when maintenance and repairs are discussed. Most investors say it takes three to six months to get to know a property managing agent and their way of working. Until then, it’s best to require all expense items to be referred to the owner (other than emergencies) prior to the agent spending any money.



Agree on a Pre-Approved Budget

After the initial period, set a limit on the amount the agent can spend (usually about the equivalent of one week’s rent) without reference to the owner. Naturally, as with any contractual arrangement, investors should always have their agreement with their agent evidenced in writing.



Speak to an Experienced Essendon Property Management Team

If you’ve got questions around what to expect when becoming a landlord, chat with our team of experienced real estate agents. Not all agencies are created equal, and Pennisi Real Estate’s strict processes, reference checks, inspection schedules and comprehensive reporting procedures ensure your property is in good hands, enjoying the highest rental yield possible in today’s property market.