Technology continues to change. Whether we like it or not, technology is playing more and more of a role in the world that we live in and is affecting industries all around the globe. It seems that now property management’s turn is next.
Our team already use software for inspections, rent reconciliation and to log and track maintenance requests, but it appears that technology is now going to take one step further in our industry.
Recently, there have been a number of online services for property investors, giving them an estimate rental price for their property.
Whether this will allow for a more detailed picture for investors remains to be seen, but will this service be a help or a hindrance for the average property investor? 📈
Property investment follows the same old ritual as everything else in life. The more time you spend doing it the better you will become at it. For many seasoned investors, knowing what price to place on their rental property is as simple as ABC. For many however, knowing what price to list your property at can be the stuff of nightmares.
It is a balancing act between attracting the right tenants and still making sure that you are achieving good returns. ⚖️
The dangers of online rental estimates have many aspects, but for most it would be the risk of under or over pricing your property. Because the current format of the service provides a broad range of roughly $100 to each property, investors could find themselves drastically under renting their property resulting in huge losses for the year, or drastically over pricing their property resulting in large vacancy periods.
By taking the range from an online service, property investors open themselves up to generic listing prices and not a price specific for their investment property.
Each and every property is different. Two houses on the same street with the same number of bedrooms will rent for different amounts.
One gets more sun. The other has a more modern bathroom. One is insulated, one isn’t.
The difficulties involved with taking a price from the online service is that they do not factor in these features that are individual to your house, so the price offered is not accurate.
It is extremely important to have a price that is reflective of your home and not just falling under a general range so that you can attract the right type of tenants. Often, we are told by property owners that they would rather have a brilliant tenant than achieving the highest rental price.
The reality is, the price on the property often dictates the type of tenants you will get in the house, so pricing the property correctly is imperative. 💵
When you take the risk of using an online service to price your home, you run the risk of pricing your property to attract the wrong type of tenant for your home. The system just knows what rental range to put on it by using an algorithm.
It sees only the number of bedrooms and not the quality of the home. 🏘️
Perhaps most importantly though is the lack of weight that these algorithm generated appraisals carry with banks. Having spoken to some of the leading banks, it appears that the policy across the board is that they will not be accepted. As an investor, this can impede on finance being granted for portfolio expansion.
Banks seem to follow the policy that they will only accept rental prices if given by a rental agency or based from a current rental agreement.
Across the portfolio of an investor, accurate numbers are required to secure deals with the bank. 🏦
With such a gulf between the estimated ranges and those given from property managers, it appears for now at least that the ranges will act only as an opportunity to give property investors a guideline as to where their property should be priced between.
To make sure that you are getting an accurate price for your rental property, or simply to see if there is room to lift your returns across your portfolio, give our Business Development Manager Jack a call on 04 979 6363.
Business Development Manager