If you’re considering buying a rental property in Rotorua, or putting your existing property on the rental market, we highly recommend getting a professional rental appraisal. This will detail what level of rent the property should be able to generate.
It’s also crucial that the advice you get about rent levels and vacancy rates is both impartial and accurate. Relying solely on a real estate salesperson’s advice, an internet estimate or even your own experience can result in unrealistic expectations.
Here’s why it is always best to get a second opinion from independent experts.
Realistic Expectations On Rental Prices
If you’re buying an investment property with the intention of renting, it is crucial that you know the true market value of the rent. An undervalued property can mean that good tenants looking for quality properties may not even consider your property. On the other hand, an overpriced property will not generate enough competition. This means you may not be in a good position to choose the best tenant, if any. The worst case scenario is if the rental value is much less than you expected, which could mean you aren’t able to comfortably cover mortgage payments.
We often find that appraisals carried out by sales agents are too generalised to be accurate. For example, we once stopped an investor buying a home where the agent advised the rent should be $500 per week (a figure that supported the sales price). However, based on our data on similar rental properties in the same area, we advised a weekly rent of $380. This property did eventually sell, and the new owner rented it out at $390 per week. Potential investors need to be aware that the sales agent’s sole priority is to sell the property, not necessarily to give accurate rental advice.
Not All Homes Are Created Equal
At Rotorua Rentals, our staff are specialised in property management, so we are not real estate agents. This means we will look at the property, inclusions and location as a whole. What can often be overlooked by a real estate agent’s appraisal is what is or isn’t included in the rent. This includes things such as furnishings, lawn mowing, thermal heating and power supply etc. (which all make for higher rent).
For example, imagine there are two 1-bedroom flats in similar areas. One has no thermal heating, no furnishings and a lawn to mow. The other is fully furnished with thermal heating and no garden. The truth is that the second flat is likely to rent for significantly more than the first.
Location differences can also be very important. We used to manage a luxury three-bedroom lake edge home, which was a finalist for NZ House of the Year. The rental value was nearly double that of another three-bedroom home less than 500 metres away. It’s important to realise that not all homes are created equal, even if they have similar attributes.
Independent Advice Is Key
The current rental market is very different to what was happening just a few years ago. It’s hard to believe, but we used to have a surplus of rental properties, with the tenants essentially setting the prices. Today the exact opposite is happening, with rents rising sharply and supply at its lowest level for over 20 years.
At Rotorua Rentals, you can rest assured that our rental appraisals are realistic and achievable in the current rental market. As we know the market so well, we can also give you helpful tips for improvements that can be made quickly and easily to increase tenant appeal.
Our rental appraisals can also be accepted by your bank for financing purposes. This is often required before finance will be given.
Food For Thought
We were once speaking at a property management conference in Auckland, to an audience of 240 property managers. We asked all those who were part of a sales team to raise their hands, which was around 200. We then asked them to keep their hand up if they had ever had pressure from someone in their sales office to boost a rental appraisal against their previous opinion. Around 80% kept their hands raised.
One lady even told us afterwards that she would always put a low and high price on her appraisals. The low price was from her and the high price was from her boss!
You can see why the golden rule is to always get an appraisal from a 100% independent company, that is not involved in the sales process of your prospective investment property.
Complimentary Rental Appraisals From Rotorua Rentals
Don’t get caught out with wild guesses or biased opinions. Ensure you seek professional and impartial advice before you make any decisions.
At Rotorua Rentals, we provide free rental appraisals for anyone looking to invest in property in Rotorua. Our rental experts are completely independent, guaranteeing accurate advice on rent levels and vacancy rates. We can also provide your mortgage lender with a written appraisal.
If you’d like to arrange an appraisal, please don’t hesitate to contact our team.