We recently had a property investor approach us after their property manager conducted an annual rent review for their property in Southeast Queensland. Their property manager had suggested that they increase rents on their $550 per week rental by $30 per week.
The property investor had seen media reports that rents had increased in their area in the vicinity of 20% – 30% and yet the rental increase being proposed was in the vicinity of 5%.
They had always trusted the advice that their property manager provided, but this advice didn’t stack up. A cursory glance on Domain and realestate.com.au indicated that asking rents for comparable properties were significantly higher than the proposed rental increase.
He decided to ask for a second opinion and gave us a call to enquire about how we would approach the situation. It was clear to us that the property manager had conducted a thoughtless rent review that didn’t consider market conditions. The investor observed that each year the proposed increase was always in $30 per week increments, irrespective the broader market.
After much consideration, a decision was made to switch property managers. Upon receiving the property file, our property management team conducted a thorough market rental appraisal. We proposed increasing the rent by $130 per week based on comparable listings. After some negotiations with the tenant, the tenant agreed to a $110 per week increase.
By switching to a property manager that took annual rent reviews seriously, this investor generated an extra $4,200 per year in gross rental income. Additionally, by moving from a fee of 8.8% to $30 per week, our client saved an additional $1310 in management fees each year.
The additional rent and low property management fees goes a long way in offsetting the significant interest rate rises that have hit the hip pocket of all property investors. Moreover, the anticipated negative reaction from the tenants that the former property manager predicted did not materialise. Instead, when presented with the market data the tenants were receptive to a substantial but fair rental increase based on the current market conditions.
If you would like our team to review the rental income your investment property generates, please leave your details on the contact us page and our team will assist.