What are the pros and cons of investing in a commercial property?
What are the pros and cons of investing in a commercial property? Read on to learn more. ...
Many investors are harming their bottom line by refusing to be flexible with the amount of rent they charge, says a property market analyst.
According to Simon Pressley, managing director of Propertyology, too many investors fail to contemplate current market conditions when setting their rent levels.
Mr Pressley believes this is an example of poor decision-making and is ultimately harming investors’ bottom lines.
“What is the sense in insisting on a particular rental figure at the expense of a longer vacancy period? It is irrelevant how much rent you ‘want’, or how you justify it, unless the market is prepared to pay for it,” he said.
Mr Pressley said astute investors know that three factors will determine how quickly a property is rented out: price, presentation and promotion.
In addition, he said, they need to be flexible in order to maximise their investment.
“Every market’s vacancy rates will fluctuate from time to time, and sometimes the best decision is to advertise the property for five per cent less than your competition,” he said.
“Eighty per cent of something will always be more than 100 per cent of nothing.”
Mr Pressley said property managers can help investors get the most from their rental rates - but some investors can’t see past the dollar signs.
“Why is it that the first question investors ask is, ‘What do you charge?’ This is a classic example of how many people lose sight of the primary objective – property management fees are only one line entry in the profit and loss statement.”
Instead, he said investors should ask questions about their office systems, staff turnover and ratios of properties to property managers.
“I also ask questions about their processes to minimise vacancy periods and arrears, how they handle maintenance requests, and I review samples of their rental advertisements.
“As with a majority of business decisions, it’s not so much about what a property manager charges, but what they do – or don’t do – for it.”