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Tight Rental Market

Discussion in 'Real Estate' started by lorrimer, 19th Aug, 2008.

  1. lorrimer

    lorrimer Well-Known Member

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    Is it really as tight as is being portrayed in the media?
    My new IP has been on the market for over two weeks now and only two viewings so far.
    Both said they wanted it, but then didn't follow through with an application.
    All the local agents are saying that things are just very quiet.
    I don't really want to drop the price as firstly I don't think it's over priced compared to others on the market, and secondly nobody has tried to negotiate on price. I've only got it with one agent at the moment and it's advertised on the net.
    It's in the Noosa area BTW.
    Any tips?
     
  2. D&K

    D&K Well-Known Member

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    The vacancy rates reported are often between 1 - 2%, that's tight, but they are usually referring to the capital cities. I get the Matusik Report and based on demand and units coming on line it's going to stay tight in Brissy for a few years.

    Anecdotally, we've just had a request for a third tenant to move into a 3-bdr townhouse, others already have more than one listed; hence part of the demand is being addressed by higher people per house, as Matusik also suggested.

    Noosa is lovely, but I'm not sure the level of rental demand extends that far out of the main cities ATM, and it's definately a mining boom free zone. Are you trying to rent something at the upper end of the market, hence a smaller pool of tenants who can afford it?

    Dave
     
  3. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I think it very much depends on the area.

    If nobody is keen or negotiating, then they obviously have other options elsewhere.

    The rental market in the parts of Sydney and Adelaide that I watch is very tight - but these are in good rental locations.
     
  4. Jacque

    Jacque Team InvestEd

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    Hi Lorrimer

    As others have said, the media only ever report averages and most of these only really cover the capital cities.
    Looking at other rentals in your area available will provide you with a clearer idea of your competition and likely vacancy rates. Every area is different, after all. If your property is priced significantly higher than the largest pool of median renters you may also find your market smaller.
    Best of luck getting it rented- in my experience the fastest way I've found to attract a tenant is to lower the rent to meet the market. Insist on a 6mth lease and then increase accordingly. Also try to get your leases to finish in Jan/Feb, which is usually the peak time for people looking for new rental premises.
     
  5. lorrimer

    lorrimer Well-Known Member

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    Thanks for your prompt responses. The property is at the upper end of the market and some have said that they wanted a pool which I decided not to put in after much research on the subject.
    Jacque, thanks for the advise. I do have a couple who would like to rent the house. They are going to be building a house on the same estate soon and will be project managing themselves. The problem is they want to save some money by cutting out the agent. I'm a little wary of this as it's my first IP and I really didn't want the hassle of self letting. Is there much involved in doing it privately or would I need to get a solicitor involved? I'd really rather not go down this route, but may have to if I don't have any joy soon. I suppose the good thing would be that they would probably be ready to vacate in Jan/Feb.
    Thanks
     
  6. D&K

    D&K Well-Known Member

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    For private letting you need to look at standard tenancies agreements, requirements to lodge bonds, etc, not necessarily a solicitor (you'd loose any savings from bypassing an agent!). Should be stuff on residential tenancies authorities website RTA: Achieving fair rental outcomes in Queensland. Look for a Form 18a. I think this is the absic agreement. Not sure about bonds, etc..
    Haven't doen this for QLD as we've always used agents up there.

    HTH, Dave
     
  7. Jacque

    Jacque Team InvestEd

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    Hi Lorrimer

    It sounds to me as if you'd be more comfortable using a PM- if so, let this couple know that and look for a local PM. Self managing can be fine for some (I currently do it but only for particular tenants) but not the best decision for other investors. I can recommend Raine and Horne Salisbury (ask for Jarrod Lane) if the IP is on that side of town.
    Best of luck.
     
  8. D&K

    D&K Well-Known Member

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    Another PM option is Ray White Noosa Heads (closer than Salisbury), and there are other agencies of course.

    We went with Ray White after a survey of a few PMs in the area. We are dealing with Melissa Dixon and all has gone well so far. Quickly tenanted and reasonable rates / charges; but we're in a lower market segment than you by the sounds. I can't give an unqualified endorsement as it's only been a few months so far, but we've been happy with the service to date.

    Dave
     
  9. Jacque

    Jacque Team InvestEd

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    Doh! Obviously forgetting where the IP was in the first place. Can't see Jarrod agreeing to manage on the Sunshine Coast! :rolleyes::D
     
  10. Young Gun

    Young Gun Guest

    As a renter myself, people saying they're interested and not applying means one of two things:

    A) your IP is ugly (dodgy bathroom / kitchen / too small etc)
    B) your asking too much.

    A & B are inter related so I think you should look at the rent your asking. The rent market is tight but it doesn't mean people don't have standards and have to accept what your offering. No one is going to try and negotiate a lower price, people are just too polite for that.
     
  11. voigtstr

    voigtstr Well-Known Member

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    Our IP's contract is still pending finanace, but once it settles I'll let people know how quickly we get it tennanted. The property is in Claremont, Hobart. Purchase price 270k, hoping to rent for 300pw.
     
  12. Thudd

    Thudd Well-Known Member

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    I for one am interested in your experiences in renting it out. We'll be moving to Hobart in the future and one of our options is to buy a place now, rent it in the meantime (and which makes our trips there deductible as a bonus), then live in it as we either build or search for our 'real' place.

    Something at $270k renting for $300+pw hits the affordability spot.
     
  13. lorrimer

    lorrimer Well-Known Member

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    That's a pretty good yield.
    Our place has been valued at 900k and we're asking $620 pw.
    Already a dreadful yield and it looks like we'll have to drop the price now.
     
  14. D&K

    D&K Well-Known Member

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    Hi Lorrimer, yep, as suspected, you're in the higher price brackets but maybe not quite into the ridiculously expensive executive (canal front) rental market. There are less tenants in this range than the lower end, hence it can take longer to get one.

    I have been in this situation and it can take months to get a tenant, depending on what else is available in that price range and the locality. Eventually you have to look at what dropping the rent will cost you over the term of a tenancy, versus extra weeks being empty. That is, each week for you without rent is roughly the same loss as reducing rent by $25 pw over 6 months, 2 weeks without rent is similar to $50 pw over 6 months, etc. Hope this makes sense.

    Do you know how many similar priced houses are on the market? There has been a fair bit of inter-state advertising for Perigian Springs and Pelican Waters estates, so there may be a few other investors in that market band.

    Obviously you have bought for capital growth rather than yield. Best of luck.

    Dave
     
  15. Young Gun

    Young Gun Guest

    I really don't know why anyone would rent for $620 pw! you could buy a house for that! obviously not a $900,000 one but one in the low $300K range.
     
  16. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Says the young guy from Adelaide :rolleyes: :p

    You can't buy a decent 3BR house within 10km of the Adelaide CBD for under $300K these days - and the public transport is woeful.

    I recently worked out that if we moved to the outer suburbs of Sydney to be able to afford a decent house but still had to commute to work - it would literally add nearly $200 per week in petrol, tolls and parking to the cost.
     
  17. lorrimer

    lorrimer Well-Known Member

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    Probably to save themselves fifty grand a year in mortgage costs, whilst still enjoying the benefits of living in a luxury house.
    If they get rent assistance as well they're really laughing.
     
  18. lorrimer

    lorrimer Well-Known Member

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    Hi Dave,
    Thanks for the tips. I've dropped the price now by $25 per week. Hopefully if an interest rate cut happens next month, that should compensate. Will be interesting to see if it makes any difference. Having said that I just spoke to the agent who said it's getting even quieter with no enquiries at all on any of their properties for a few days now.
    You're right about the capital growth, we're very happy with that part of things but it does nothing to help the old cashflow!
     
  19. Billv

    Billv Getting there

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    Not if you've caught the express bus or you moved to the south side (along East Hills line) where the trains are faster and the toll is refundable..:)
    Cheers