A woman who had owned three investment properties for years approached me recently because she thought they were not earning as much as they could. We found that all of the properties were rented at much less than market value – and she was missing out on $17,000 a year in rent.
The simplest way for her to improve her properties’ performance was to put up the rent in line with other comparable properties. But most owners will have to be more creative to generate greater income from their investment properties.
As the CEO of Australia’s largest metropolitan property agency, I’ve seen and heard of every possible way owners have used to boost their rent. The underlying principle behind all the best ideas is to make your property as attractive to tenants as possible. That way, the property will rent more quickly, have fewer and shorter vacancy periods and be more popular, meaning that you will be able to select better quality tenants. When this happens, rent goes up.
The smartest property owners know that they can spend a little to earn a lot. Some landlords are reluctant to spend money on their property, but they do not realise that approach is a false economy if the property does not lease quickly or does not achieve the rental growth that it could.
After assessing thousands of rental properties over the years, here’s my top 10 tips on how to increase your rent.
1. Get the basics right
Carpets should be professionally steam-cleaned, drapes dry-cleaned, and scuffed or grubby paintwork should be touched up and appliances checked to ensure they are operating efficiently between tenancies. These items should be regarded as maintenance, not improvements.
2. Do maintenance on time
Delaying maintenance is often counter-productive to achieving rental growth. Something as minor as a leaking tap or poorly fitting door can upset tenants and discourage prospective new tenants. If you can afford to have maintenance work done immediately it needs doing, do it.
3. Renovate the kitchen
Illusion is an integral part of the renovation process if you don’t want to spend a fortune. By creating visual effects that attract the eye of a potential tenant, attention is diverted from less desirable aspects of a property. For example, painting kitchen cupboard doors, replacing door knobs and installing a new flick mixer can leave your prospective tenant feeling like they have a new and expensive kitchen.
At RUN, we regularly oversee renovations which lead to benefits which far outweigh the costs. For example, a one-bedroom apartment in the inner Melbourne suburb of Richmond had a $10,000 renovation that covered every room and included re-painting, new carpet and blinds that resulted in a rent increase from $205 to $280 a week – a jump of 37 per cent.
4. Update the bathroom
Replacing taps, shower heads and other fittings with modern equipment can create an improved look. New door and cupboard knobs, new mirrors and replacing a shower curtain with a shower screen can make a massive difference. A tired bathroom can be brought to life by resurfacing the bath, basin and shower base and painting old-fashioned or garish tiles.
5. Spruce up living areas and bedrooms
Cheap fluorescent lights drag down the quality of too many rental properties. Low-voltage fittings can plug into existing sockets without needing an electrician. Modern pendants for bedrooms are a big plus. Changing light switches and installing dimmer switches can create the illusion of a newly refurbished property.
6. Install new equipment
Installation of an air conditioner can result in an immediate rent rise of $20 a week. That will cover the cost of the new equipment within 18 months, after which time you will continue to receive the increased rent and more tenants will want to lease the property.
On a larger scale, building a carport can also achieve similar results. The costs will bring tax and depreciation advantages.
7. Add space
The layout of some properties lends itself to erecting a wall in a large lounge room to create an extra bedroom. Similarly, removing a non-structural wall in a small family room can open up the area to create a more useable space.
8. Make a laundry
In apartments, tenants love internal laundries. It is often feasible to build a front-loading washing machine, clothes dryer and trough into a large cupboard for a relatively modest budget. It requires a plumber but the outlay can be well worth the cost by increasing tenant demand and rental return.
9. Adopt a business mindset
Most people who buy a business for $500,000 would treat it seriously and have the systems and support to get the best results. Too many investors buy a property and then treat it like a hobby and it doesn’t achieve its maximum potential. The most successful property owners have a firm game plan and surround themselves with good people to do the jobs they can’t or don’t want to do. This allows the investor to look beyond the details and keep focused on the big picture of building their portfolio.
10. Use an experienced property manager
A good property manager is worth their weight in gold. They will care for your property as though it was their own, ensure it obtains the highest possible rent, minimise vacancies, advise you promptly of maintenance or other issues, collect the rent and pay the bills on time and a multitude of other tasks which might include overseeing a major renovation.
For a couple of tax-deductible dollars a day, a professional property manager can save and earn you thousands – and take a load off your mind.
Rob Farmer is the CEO of RUN Property, Australia’s largest metropolitan property agency, which manages properties valued at more than $10 billion and has a team of sales specialists in Victoria, NSW and Queensland. RUN Property – sales, leasing and management. For more information visit www.run.com.au