Insights from Pippa Rose – Lead Investment Services Manager
Maintaining rent at market value is a crucial aspect of property management. It ensures a balanced and fair rental market for both landlords and tenants. There are several compelling reasons why keeping rent at market value is essential.
Ensuring Fair Returns for Landlords
One of the primary reasons to keep rent at market value is to ensure that landlords receive a fair return on their investment. Properties require maintenance, insurance, and other costs, which need to be covered by rental income. By setting rent at market value, landlords can ensure that the majority of expenses are met and their investment remains viable.
Preventing Property Devaluation
Rent that is significantly below market value can lead to property devaluation. When rent is kept at a competitive rate, it reflects the true value of the property and helps maintain its market position. This is important for sustaining property values in the long term or when an owner considers their borrowing capacity, refinancing or selling.
Attracting Quality Tenants
Setting rent at market value attracts quality tenants who are willing to pay a fair price for a well-maintained property. Tenants who recognise the value of a property are more likely to take care of it and comply with the terms of the lease. This reduces vacancy periods and turnover rates, leading to a more stable rental income for landlords.
Balancing Supply and Demand
The rental market operates on the principles of supply and demand. Keeping rent at market value helps balance these forces, ensuring that properties are neither overpriced nor underpriced. This balance is essential for a healthy rental market where properties are accessible to tenants while also being profitable for landlords.
Encouraging Regular Property Maintenance
When rent is maintained at market value, landlords are better positioned to invest in regular property maintenance and improvements. This not only enhances the property’s appeal but also ensures compliance with health and safety regulations. Well-maintained properties attract and retain tenants, thereby reducing vacancy rates and ensuring consistent rental income.
On occasions when rent isn’t kept at market value, we often see that tenants stop reporting maintenance, as the tenants don’t want the landlords realising the rent is below market value, therefore the property deteriorates quicker. Often requiring more money to be spent at the end of the tenancy.
Promoting Financial Stability
Financial stability is crucial for both landlords and tenants. For landlords, keeping rent at market value ensures a steady income stream, which is necessary for covering mortgage payments, maintenance costs, and other expenses. For tenants, fair rent means they are paying a reasonable price for their accommodation, which contributes to their overall financial well-being.
Refinancing or Borrowing
In the event of refinancing or exploring borrowing capacity to purchase another property, the rent achieved for the existing investment property is taken into consideration. If your rent is low, it will affect the amount you can borrow.
Key Takeaways
- Maintaining rent at market value ensures landlords receive fair returns on their investment properties while covering ongoing expenses like maintenance and insurance, and preserving their borrowing capacity for refinancing or purchasing additional properties.
- Properties with below-market rent risk devaluation over time, as tenants may stop reporting maintenance issues to avoid rent increases, leading to accelerated deterioration and higher costs at the end of the tenancy.
- Setting appropriate rent attracts quality tenants who recognise the property's value and are more likely to care for it properly, resulting in reduced vacancy periods, lower turnover rates, and more stable rental income for property owners.
- Market-value rent creates a balanced rental ecosystem that benefits both parties—landlords can afford to properly maintain their investments and comply with regulations, while tenants receive well-maintained accommodation at a fair price that contributes to their financial wellbeing.
Need Property Advice?
Keeping rent at market value is vital for maintaining a fair and balanced rental market. It ensures that landlords receive a fair return on their investment, attracts quality tenants, and promotes financial stability for both parties.
Whether you’re looking to optimise your property portfolio’s performance or need help managing your investment property, Leah Jay is here to help. Book a Property Health Check for personalised advice on how we can help you achieve your property investment goals.
