As a property investor myself, I feel the pain of having to drop your rental price.
But after sitting back and looking at how rental prices have dropped compared to to the same drop in interest rates, I was surprised to find that the overall rental returns for the average investor are actually better than 2 years ago.
Here are some facts to consider that actually put the Perth rental price drop over the last 2 years into perspective…
Since September 2014 the Perth median rent has dropped from $450 to $380 or 15.5%.
Over that time the RBA cash rate has dropped by 1%, taking the average rate from around 5.5% to 4.5% which has given an 18% reduction to interest payments for the average investor.
So depending on the suburb, the overall rental returns for most investors are actually better off today than 2 years ago!
Check Your Interest Rates
It is always worth getting back in touch with your finance broker and having them check if their is a better interest rate available. Providing your property valuations stack up and you still qualify under the banks new assessment criteria, it can be well worth switching to a cheaper interest rate.
But what about the drop in house prices?
Over that time, the Perth median house price had dropped from $551,000 to $530,000… Which is not great news for any property owner but the reduction on paper will only affect you if you are having to sell your property, it doesn’t affect the hip pocket each week.
The market always moves in cycles and cannot keep going up forever. This is the correction Perth needed to have and before long we will be back to more sustainable growth.
The Real Rental Return Killer
The real killer to your hip pocket is having your property vacant, so rather than trying at a higher rental price or holding out for the overpaying tenant that never comes, it is far better to face the price drop and find quality tenants faster.
Let’s say the rental market has dropped $40 per week for your property, would you rather make the adjustment within a week of going to the market or cost yourself thousands of dollars before having to adjust the price to find a tenant anyway?
If everything else is done well, it comes down to price!
If you have your property presented well, marketed well and shown after hours… the only thing left to get right is price.
Read an article on: “The Average Perth Property Investor is Receiving a Better Overall Rental Return than 2 years ago!”
