How much rent should you charge for your investment property?

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Use rent to boost your income

Renting out an investment property is a great way to boost your income each month. It could mean that you’re able to afford a few extra luxuries, security for your family, or funding for your retirement.

 

Plenty of Australians invest in property as a way to maximise income and secure their futures. Many people will have happy, reliable tenants for a number of years – but to attract these kind of tenants, how much rent should you charge on your investment home?

 

Rental yield versus market conditions

Some sources claim that your rental income should yield around 0.8 – 1.1% of the total value of the home. So if your property is worth $500,000, your monthly rental income should be around $4000.

 

We believe this oversimplifies and could lead to problems down the line. There are many factors to take into consideration when you are working out your potential rental income for your property. It depends on your property, the suburb, the conditions of the rental market, and the rental charged for other properties in the area.

 

Get to know the rental market

The most important thing when setting your rent is knowledge of the property market. This means checking out other properties in your area and seeing how much they are renting for.

 

A few tips – check out properties with similar amenities and decorative order to yours, including the number of bedrooms, bathrooms, and how much outside space there is to offer. This should give you a good indication. Take note of which properties have been ‘let’ and which are hanging around on the market – it may be that price is a key factor at play.

 

If you’d like to know more about rental prices in your area, download a free property suburb report, with personalised insights and comparisons.

 

Don’t inflate your rent

Your rental rates should not be focused on how much money you want to make at the end of the month. While building your wealth is an important factor, it shouldn’t be the sole way you determine your rates.

 

It might be tempting to put your rates up as high as possible to maximise your monthly profits. This could lead to your property being on the market for longer than you’d like – especially in areas with plenty of homes for renters to choose from – and run the risk of a void period where no tenants occupy your property. In markets that are particularly saturated with houses, you might need to set a slightly lower price to make your property stand out to prospective tenants. As little as $5 a week could make the difference between clinching the perfect tenants and having an empty investment.

 

Negative gearing and tax benefits

Take a look at your expected outgoings related to the property – including loan interest repayments, insurance, maintenance costs, management fees and other bills. If the total sum of these expenses is more than what you could reasonably charge for rent each month, don’t despair.

 

This is known as negative gearing, and there could be some significant tax benefits for setting up your investment property in this way. For example, if you make money on a property each month, you will need to pay extra tax on the income you receive from rent. But, if your property is negatively geared, the difference represents a loss and can be offset against other income (like your wages) to reduce your overall tax bill – in some cases by 20%.

 

If this all sounds complicated, learn more or speak to one of our advisors for free to see how negative gearing could work for you.

 

Get expert property investment advice

When setting your property rent prices, it’s important to get market insights, benefit from local knowledge, and have an expert take a look at your finances on the whole to see if there are any tax savings to be made. Our team is constantly analysing the market to forecast trends in rental prices. This means that if an area is about to get infrastructure investment, new businesses and amenities, we’ll know about it and can advise accordingly regarding your rental rates.

 

We also offer a full property management service covering advertising your property, finding tenants, conducting inspections, and managing tenant queries. All you have to do is pick up the phone every now and then for a chat with one of our team.

 

So whether you already have your investment property, if you’re scoping the market to find out where is best to buy, or you’re due to renew your lease, we have the services to ensure you’re making the best decision for now and the future.

 

Book your free consultation with one of our experts now


 

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