We are often asked to take over the management of a property (managed by another agent) only to discover that the rental on the property is way below market rent. Believe it or not, sometimes we acquire property that has not had a rental increase in years!
Some owners could argue that they have great tenants, who look after the property as if it were their own and, what’s more, they never have a vacancy. Unfortunately, because of these reasons they feel obliged to keep the rent at the same rate. For heaven’s sake, this is your investment property and your future! Don’t give away your rightful income just because your tenants are nice. If you have great tenants, and you love them – reward them! Give them a week’s free rent at Christmas or gold class tickets to movies. Tenants, just like employees love recognition and rewards for great work.
OK, so you never have a vacancy you say. Would you move if you knew you were onto a good thing because you had cheap rent? If your tenant should be paying $320 per week and is only paying $270 per week – why would they move?
Here’s an example of the impact renting your property at below market rent could have:
If your property is $50 below market rent, $50 x 52 weeks =$2600 per year x 4 years = $10,400. Just remember you haven’t saved these dollars, your tenant has!
And another thing, what happens when you decide to sell? If an investor was looking to buy your property, you may be forced to sell thousands of dollars below the asking price because the rental income figures don’t stack up. More dollars lost.
If your property manager is not watching the market closely and working to see that your investment is performing to its full potential, you could be losing thousands of dollars and not even know it. You could be hoodwinked into thinking everything is running smoothly. Don’t think for a minute just because your property manager is nice, and appears on the surface to be doing a good job that you don’t have to worry. Nice is fine, but shouldn’t you be looking for a property manager who is great at their job and understands the market? One who is looking to get you the best possible tenant with the best returns?
Look for the two essential elements in a property manager- skill and experience – nothing else matters.