Property Lease reduced

Hi
Has anyone advertised a property to lease for a certain amount and then reduced it after 3 weeks in market. do people need to wait longer or what impact does it create. whats the timeline for reducing rent if there is any or is it up to individual/agent calls. Sorry this is my first property which i have put up in market.

 

What advice is your Property Manager giving you? (speak to them regularly) Are you working from a rental estimate they gave you? Are you getting interest by people actually inspecting the property? Is the property listed at a market rent value? ( and not too optimistic )

I read on here good advice that you should drop your rent week on week by say $5 per week to meet the market. Best to get someone in for a slightly lower rent to cover costs and you can increase rent once the tenant is settled ( give perhaps 12 to 18 months before increasing rent ). I tried the approach of decreasing by $5 per week but my PM advised me to hold off as there was reasonable activity from people inspecting the property.

The outcome was that I dropped it by $10 per week in the course of 4-5 weeks that it was on the market. This was in the middle of the estimated rent range for the property.

I also faced renting my property in a market where there had been a significant amount of investor buying activity. I also had a delayed settlement and some reno works to be done. This meant that lots of properties settled and were placed on the market for rental in this time, significantly increasing the competition in the market. The increase was about 25 to 30% in terms of number of properties available for lease compared to when I first placed an offer on the property.

 

Agree with both the comments above. Make sure you keep an eye on comparable properties and what they're listed for.

Market determines the price. If it is priced right and your vacancy rate is consistent with the area, you should be right.

 

I would rather have a property leased for a conservative amount- get more potential tenants through, gives you the opportunity to choose through potential applicants and get leased quicker. No reason advertising for market or above market when it will be on the market for 3-4 weeks, that's money going out of your pocket. Best thing to do is go slightly lower than comparable properties sign a 6 month lease then put rent back up to something that's a fair value

 

Thanks everyone, this is exactly what has happen to me Wombat (4th para). have reduced it $10 this week and see how it goes. 5 people for open for inspection, 4 took the application but heard nothing from last weeks open for inspection as per the agent. Also on purpose i had my rent a bit optimistic just to get a feel of the market now reducing it, it will be par with the other properties on the market. Not sure if been optimistic was right/wrong

 

Start conservative. Get as many applications as possible. Choose tenants wisely. Increase rent slightly each year until it is yielding as intended.

 

The difference of if it took you 1 extra week to get a place rented at $400 pw compared to $395 it would take you 80 weeks (1.5 years) just to get back to break even (not including interest).

 

"Being optimistic" is not a good strategy. Most tenants aren't stupid, they look at comparable properties and, all things being equal, will choose the cheapest. Wouldn't you?

We always priced rentals at the lower end of the range, and only once had to drop by $10 per week when the property was not rented within 2 weeks.
Marg

 

@Big Will - summed it up perfectly. A week's lost rent creates a bigger hole in the budget than achieving that extra $5 or 1% better to discount and get rent than to hold out on the expectation of above market rent and achieve zilch.

 

Always received the rent I wanted. It just takes more time. A higher rent means a better tenant.

 

Usually means better tenant.

However you would still be getting the same quality tenant at 440 against 445, however if you took 2 weeks to get your 445 compared to a 440 you are behind for about 3 years before you get back to even (assuming no rate increases).

We are not talking about renting a property that should get 500 and advertise it at 300 to get a tenant right away, as they are two different markets. What we are more talking about is with the 500 property if you try for 510 and it takes you 1 month to get it or if you rented it for 490 and you got it tenanted right away which is better in the first 12 months (as you can increase the rent afterwards)?

 

What is wrong in waiting a month but getting the right tenant? Raising rates sometimes gives bad results as well. I once lost a good tenant by raising rates. I backed off, but it was too late, that chap moved out. There is no exact rule how to do it. I prefer to get right from the start, than try to catch a train that had left.

 

Make sure you avoid listing at an amount just over the search thresholds on the big real estate websites, ie avoid listing at say $455 or $460 as loads of people will search for properties renting from $400 - $450 and your property won't show up.

 

You can do it the way you like, after all only you will have the most interest in your own financial future.

Waiting a month at $450 pw = $1950 (450*52/12) which if you rented it 2 weeks earlier you at $445 it would take you 4 years (without increasing either rents). If you were able to rent it right away it would take you 7.5 years.

Regarding quality of tenant I think you will get the same tenant at 445 compared to 450, as you are comparing $23,140 rent vs $23,400 p.a or $260 p.a difference.

End of the day do what you feel is best but I'd rather rent my place at 445 right away (or two weeks earlier) than wait 1 month to get 450.

You can do other strats like each week reducing, e.g.;

week one 460
week two 455
week three 450
week four 445
week five 440
week six 435
etc

You might get lucky and get more rent on week one however if not you will eventually get a tenant even if you did something like rent $200 and comparables were $450 the tenant can put a higher price then the asking price....

 

Don't you then miss everyone searching from 450-500? (I don't know how it works)

 

Highly dependant on timing and the market, normally my IPs rent out within a day or two of the first open, but end of last year I had one sitting on the market for 2 months!! 2/2/1 in North Sydney fwiw.

Advertised it at current rent but agent said the rental market was very weak, dropped $25 after a month, rented after another month.

Even in a better market I'm not sure I'd hold it at the same rent until I find a tenant... two weeks' lost rent might not be negated by the extra $20 you receive over the next 12 months.

 

I have dropped it from 350 to 340 this will be the third week on the market

 

Sure, but if you're having trouble getting people's interest then there may not be anyone searching in the higher bracket who wants your property. More likely to get people looking in the lower bracket. That's the point I'm trying to make.
It's fine if you're listing at $480 or whatnot, but no point hovering at the bottom end of a higher bracket.

 

Things might be quiet in the area but might start picking up soon. I rented mine at the start of winter. It took 12 weeks to get a tenant. It was priced agressively from the start. It just a dead market at the time. If you want to see how the market is doing, you can go to some open for inspections in the area.