Tips for Calculating the Right Rental Price
Find out how to find the right balance and calculate the rental price for your property.
Top Tips for Calculating the Right Rental Price for Your Property
Setting the right rent for your property is crucial for attracting quality tenants and maximising your investment's profitability. To ensure you set a rental price that is both reasonable and competitive in line with current market conditions, we've compiled some tips to guide you through the process.
Keep reading to learn more and make the most out of your rental property.
1. Research the Market
Before you start crunching the numbers, the first step you should take is to research the market in your area. Check out rental listings for similar properties to get a sense of what others are renting for.
We always suggest starting with RealEstate.com.au as it’s Australia’s largest property listing portal so it will give you a pretty good starting point in determining what a fair rental price should be. Start with a search of your suburb or local area and input the parameters of your property, leaving out the price. You may even discover some surprising trends and helpful tips on how others market their property!
We also have a handy free tool here that can be used to help you determine the price. Click here to download a Rental Estimate Report.
2. Evaluate Your Property
Next, evaluate your property to determine its rental value. Consider factors such as the location, size, and condition of the property and think about any additional features that might make your property stand out, such as a garden, or outdoor spaces that would be attractive to renters.
Other amenities such as modern appliances, storage space, or easy access to public transportation, restaurants shops can also increase the perceived value of your property and allow you to command a higher rental price.
3. Look at Your Expenses
This includes everything from mortgage payments, and taxes, to insurance and maintenance costs, plus any other expenses related to owning and managing your property. Once you have a clear understanding of all your expenses, you can begin calculating how much rent you’d need to charge to cover them.
It’s important to understand that it may not be possible to cover every single expense and whilst your investment is there to make you money in the long run, there are other factors to consider. The market will be the main factor that determines the price for your property - good old ‘supply and demand’.
4. Crunch the Numbers
Add up all of your expenses and divide the total by the number of months in a year. This will give you the minimum amount of rent you need to charge per month to cover the basics.
You need to also consider the market and your property's value. If your property is in a desirable location or has unique features, you may be able to charge more than the minimum amount.
Setting the rent price for your property can often stir up strong emotions, but it's crucial to approach this decision with objectivity rather than letting emotions drive it. It's essential to consider all available data and make an informed decision that reflects the true value of your property in the current market.
Avoid the temptation to set a rent price that's excessively high, as this could potentially deter prospective tenants and lead to missed opportunities. Remember that finding the right balance is key - setting a reasonable and competitive rent price will help ensure that you attract quality tenants while also maximising your rental income.
What is the best way to collect rental payments?
We are often asked about the best method for calculating rent, as well as the most effective frequency and approach for collecting payments. When it comes to matters of money, the key is to maintain simplicity and transparency!
One of the common approaches is to collect a monthly rental amount and this is typically calculated by dividing a weekly rental amount by 7, multiplying the result by 365, and then dividing the sum by 12 to get a monthly figure.
A monthly amount may not always be suitable for everyone though and renters usually prefer having their rent aligned with their pay cycles which is most often weekly or fortnightly in Australia. It's completely up to you and your tenant on the best frequency for payments based on the circumstances.
Rent collection is one of the most important aspects of running a successful and profitable rental property. The best way to ensure that your rent is collected and paid on time is to ensure that the payments are set up on a schedule and are automatic.
When payments are automatic, things run on a set schedule. This means not having to worry about it and there is less room for human error. On RentBetter, tenants can pay rent using a credit card or their bank account and our system will ensure payments run on schedule as per your lease agreement.
Find out how RentBetter can help you collect the rent from your tenant here.
Finding the perfect balance.
Calculating the right rental price for your property requires research, evaluation, and careful consideration of expenses and market conditions to get the right balance.
Once you have determined a fair rental price that you are happy with, you can go ahead and put it in writing - whether that be the price you are going to advertise your property at to find a tenant or or the price you are adjusting for your current tenants during the lease renewal process.
RentBetter provides a comprehensive tech platform that helps you manage the entire rental process. From advertising to managing enquiries and applications, selecting a tenant, creating the lease agreement, collecting bond and rental payments, generating condition reports, managing tenant bills and expenses, and even handling maintenance requests - RentBetter streamlines the entire rental process to make managing your property easy and everything is stored in one place when you need it.
If you’d like to find out more about how we can help, register for a demo below.
