The best time to consider how to achieve maximum rental dollar is before you’ve actually purchased an investment property.

Everyone wants to live close to a lifestyle precinct, but also considering who your ideal tenant is will make a huge difference, advises Greville Pabst, chief executive of independently owned valuations and buyer advocacy companies WBP Property Group.

“Executives will pay a lot more than students, but they expect far better quality accommodation, too. A property in a tree-lined street as opposed to a tiny one-way street with limited parking will obviously help you command top dollar,” says Pabst, who’s also on the jury of TV show The Block.

“When you’re looking through a property, get some perspective on your purchase and what’s feasible in rent by considering if you could live there yourself, or if you would be prepared to put your son or daughter into the property.”

Self-contained laundry facilities, modern bathroom and kitchen, built-in wardrobes, good storage and two car parking spaces are important considerations if you want to achieve as much as you can in rent, he says.

“The other consideration when you’re purchasing a property is to remember that a two-bedroom property will probably cost $150,000 more to purchase than a one-bedroom property, but in most cases, will only achieve an extra $30 or $40 a week in rent, which may not make it a worthwhile investment,” Pabst says.

Also, make sure you understand what represents value in the mind of your tenant, advises the director of Achieve Property, Mark Kelman.

“It’s important to remember that adding value to your property is a completely different equation to cost. For example, keeping your tenant happy can be as simple as fitting an extra power point to the bathroom, giving the living room a lick of paint, fitting a sensor light to the entry or adding a better quality lock to the front door.

“Others just want a hand maintaining the garden, or perhaps an extra car parking space, says Kelman, who’s the author of Become a Property Millionaire in Your Spare Time.

“Your job as the landlord is to understand what represents value to your tenant and make sure you keep your property in top repair at all times.

“You don’t want to waste money on things you’d like to add if it isn’t going to add value to the tenant,” Kelman says.

When deciding how much rent you could achieve, do your own homework rather than simply trusting what your property manager tells you your property is worth, he adds.

“Some property managers will err on the side of caution by suggesting slightly less in rental income because it makes their life easier to charge less and attract a larger pool of potential tenants to select from,” Kelman says.

Landlords should also find out what the rental vacancy rate is in the area they’re purchasing in. The lower the vacancy rate, the more you’re probably going to be able to achieve in rent, he says.

If you’ve purchased a property that’s scarce in your suburb, such as a three-bedroom house in an area filled with vacant one and two-bedroom units, you’ll be able to achieve a higher rental income, he says.

Another important tip for investors is to charge the tenant water on top of the rent, rather than including the cost in the rent, he says.

“It’s better to advertise your rental price ex-water, as this keeps the rental price lower and means you can add a bit more rent into your advertised price when the tenant is signing the lease. The other reason this is a better approach is that if the tenant has long showers or waters the gardens more than you factor in, you won’t be stung for excess water charges.”

Also make sure you always present your property in the best possible light, says Jessica Darnbrough, national spokesperson for Mortgage Choice.

Be sure the place is spotless and everything works, avoid personalised furnishings and ensure there are locks on all doors and windows, which will also be required by your insurance company, she adds.

“Tenants understand that rental increases are necessary, so make sure it’s an easy process by being open about an upcoming rental increase well in advance,” Darnbrough says.

“You may even be better writing a rental increase into the lease as they’re signing, so the tenant realises the rent will increase every six months or year. Just make sure you stipulate how much the rent will increase and on what date.”

However, you’re going to have much better luck increasing the rent if you keep the property well maintained at all times and respond to any maintenance requests straight away, rather than expecting tenants to put up with a leaking tap for weeks on end,” she says. ACTION PLAN

How to increase the rent on a budget

  • Understand what represents value to your tenant.
  • Consider offering a service, such as an occasional gardener, when increasing the rent.
  • Find out the vacancy rate in your suburb to understand where you fit in the market.
  • Respond to maintenance requests immediately.
  • Be up front about rental increases in advance.

Source: Mark Kelman, director, Achieve Property

Posted by Nina Hendy- Money Manager (Fairfax) on 9th April, 2015