What Rising Interest Rates Mean for Rental Income

If you own an investment property or managing your property right now, this article is urgent reading. Now is the by far the most important time I’ve seen that your property is being managed professionally.

In 2022 interest rates rose by 4% which represents $40,000 extra repayments (not taking compounding into consideration) for every $1m you owe the bank.

Meanwhile, many tenants have complained about $100/wk increases in their rent, but that’s only $5,000 a year towards your extra repayments.

As an investor, it’s extremely difficult to bankroll an additional $40,000 per year for interest rates (using this example) if you are not able to increase the rent on your property.

If you haven’t already been contacted by the agent managing your property about what is going on and how to best maximise your potential as an investor, then you need to ask yourself “why”?

Ask too much for your property and it sits empty.

Ask too little and you are effectively making donations to your tenants.

All properties have a “sweet spot” for the rental price where the right tenant is happy to pay and the landlord is happy with the return.

If you are an owner and right now you are feeling uncomfortable… let’s have a little chat.

Now before I get into things, for those of you that know you should be doing something about it, but don’t have the time or inclination, just click the button below and have a confidential chat with our strategy team.

Managing your Property: Get a "Managing Agent Health Check"

If you are peeved off with your current property manager, then find a new one!

If you want our help, we’re here. You have no excuse. We use bulk buying power and leverage our partnerships with the best property managers so you get service there’s no way you could negotiate for yourself.

Here’s what you need to know about managing your property in 2023:

1. There’s a big difference in the commission rates of managing agents

Does cheaper mean you’ll save money? Does more expensive mean higher rental yields?

Well… no.

In fact, I would argue that the number one thing you need from a property manager is superior service. If you have a proactive property manager contacting you prior to issues becoming difficult, or handling issues effortlessly so you can think about other things, that has to be better for you, right?

It makes no sense to drive half way across town to save 4c a litre on fuel, just the same way it makes no sense to save $200 on commissions if it’s going to cost you time, stress and headaches dealing with an inept property manager.

2. A good rental manager takes care of your investment. A GREAT rental manager is proactive and constantly searching for ways in which you can maximise your returns.

A great rental manager should be in constant and consistent contact regarding the rental price and condition of your property. It should be regularly and professionally assessed, with rises in line with market expectations.

They should be providing feedback on what capital improvements you could make in order to secure rents that will yield a ROI.

3. Many managing agents are justifiably lazy.

Justifiably? Well, not really… but when you consider the numbers, you can understand why they are certainly not motivated.

Lazy managers just look for new listings and don’t care about small incremental rises. Why? Because a $20/wk rental increase might mean over $1k per year for you, but it might represent maybe $50 per year for them.

Meanwhile a new listing for them could be worth thousands. Where would you spend your time if you were a tad lazy?

4. Your time is important. Focus on what you are good at and hire others to do the things you can’t or don’t want to.

If you own an investment property, you should be able to deal with it through the odd email and balancing your spreadsheet for a few minutes each month.

The rest of it should be up to the managing agent.

If you find you are spending time thinking about repairs, improvements, tenants, rental yields and so forth, then you need to wonder what you are actually paying your managing agent to do.

This video should give you a rough understanding of how to think about how much rent you should be charging for your property and how to go about finding the right managing agent for you.

Remember, if you aren’t constantly keeping your rent in line with the market, it makes it far more difficult to justify a one-off significant increase in the future.

It’s a numbers game. Remove your emotions.

Need help? Click here to book a chat with our strategy team and take a “Managing Agent Health Check”.

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