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Property Investment

Ten % at Day 10

Many novice investors think that they would like to hold out for the highest rent possible before letting the property – even if this means losing several weeks rent. Is this a good idea?

Experienced property investors report that the best way to maximise the return on their investment properties is to keep the property let – in other words to minimise vacancy. It is not always easy to decide to lower the rent. It is tempting to hold out for “just another week” and before you know it, two have gone by and still no tenant.

Experienced investors say that doing the sums shows that holding out for a high rent is counter-productive.  If the property is vacant at $350 a week, losing this amount for only two weeks is $700.  Spread this amount over a year and it will reduce the average weekly return to less than $350.  In actual fact, based on these figures, it reduces the average weekly rent over the whole year to around $336.

So it is not worth holding out for a higher amount.  Experienced property investors work by the rule that if a tenant is not secured by day ten of the leasing campaign, the asking rent should be reduced by ten percent, thus the “ten percent at day ten” rule.  This takes the agony out of the decision, enabling the property owner to distance themselves from the process by working to a system recommended by experts.

An important point to remember is that the property needs to be clean, well presented and well maintained to assist in minimising the vacancy, but sometimes this is not enough.  Sometimes the rent may be to be reduced to reflect the market conditions.

If you would like advice on any property management matter, please do not hesitate to contact the Professional Team at Ray White Dubbo on 02 6884 1555.