How much rent to charge for your property
A guide to setting a fair and competitive rental price on your property.
You’ve decided to rent your home because it’s not selling at the price you’d like and you want to wait a year and see what the property market is doing in a year’s time market. If your home is in Auckland, perhaps due to the extremely strong rental demand in the city after the January 2023 flooding, you might decide it’s good timing to add a rental home to the market.
So where do you start? Finding out what you could rent the home out for will be key to your deciding to rent or to sell, but gathering information is fundamental.
What you’ll learn:
- Where to research for rental pricing information
- Who to consult for advice before you rent the home out
- What features of the home will be appreciated by tenants
- Furnished or unfurnished, what’s best?
- How long it’ll take to rent the property in the current market
If you decide to use a property manager – and the majority of property owners do these days with more compliance – they’ll do an appraisal of the features of the home, noting how it will appeal to tenants, and they’ll give you a weekly rental estimate. Similar to when you ask real estate agents what your home might sell for, property managers will look at recent transactions in the area (“comps”) to help them come up with a figure.
What should you look at to help come up with a rental figure?
So you’re ready to discuss a fair rental price for your home, but before you meet with your property manager, do your own homework first.
- Look at other similar rental properties on Trade Me Property: and see what rents property owners are asking at the moment.
- Rental Price Index: find the latest rental market trends by looking at Trade Me’s Rental Price Index, where you’ll see that rents finished at an all-time high at the end of 2022, though centres like Auckland and Wellington have cooled.
- Property Price Index: rents will be influenced by general property market conditions so it’s also worth looking at Trade Me Property’s Property Price Index.
- Have your home professionally valued. Ask a couple of recommended property managers to give their opinions on the current market and what rent your property might command. These rental agents will use recent lettings to support their estimates and they’ll have good tenants on their books ready to take a look.
Would your property pass healthy homes standards?
If the property you’re hoping to rent has been your family home for a number of years, there’ll likely be a few things you need to do to update it before bringing the home to the rental market.
Des Ryder, property management director at Anne Duncan Real Estate, which has just announced a new partnership with Ray White, says to bring the home completely up to healthy homes standards, you may need to add a fan in the bathroom, put in better insulation to block out drafts and add a heat pump. Your property manager will have the contacts to get these jobs done, says Des, and they’ll let you know what’s necessary. A moisture membrane or barrier under the house will be a requirement which will cost you around $1500. These may all be added costs but, on the bright side, it’ll make your property easier to sell when the time comes, because both investors and home occupiers will appreciate these additions.
The importance of getting it right
According to Crocker’s Chief Executive, Helen O’Sullvan, the most valuable features of a property rental to tenants are security of tenure and a warm, dry, comfortable home. Some people might like a garden, others may not, while most want the home to be unfurnished because, if it isn’t, then they need to find somewhere to store their contents. Having the option for the home to be furnished or unfurnished is a nice plus, suggests Helen.
People also appreciate the features that they look for in a home they’re buying (open plan living, good indoor outdoor flow) but there might be more willingness to compromise on longer term things like schools, says the Crocker’s CEO.
Allowing people to have pets is another big plus. The property investor, who allows pets in her rental homes, says for the landlord it makes sense. When people move with a cat, once they’re settled they don’t want to move the cat, so it means they’re good long-term tenants.
Trade Me Property research also finds that tenants appreciate:
- Square footage – this is particularly relevant if you own an apartment, people will pay more for a 100 sqm apartment than a 50 sqm one.
- Views – does your property have seaside vistas? Or pretty nighttime urban views?
- Modern and functional – does your property have top-spec appliances and brand new carpets? Heat pumps are an added bonus for many tenants.
- Low maintenance – Kiwis want easy and comfortable living, particularly when it’s not their own house.
- Location – as you’d expect, central suburbs such as Ponsonby, Grey Lynn, and Mount Eden in Auckland or Newtown and Brooklyn in Wellington are highly sought after and often fetch a lofty rental price. These spots are so popular because they’re handy for facilities and public transport.
Dealing with tenants you know, you still need a lease
Even if you’re renting your home to help friends and family with a short-term need, it’s still a tenancy and you need to have all the right lease documentation, says Helen.
“It’s like a marriage prenup, if you’ve talked through the divorce arrangements, they’re less likely to happen,” says Helen. You’re better to do it on the way in.
And it’s good to get a bond for wear and tear, particularly if you’re dealing with family. Some of these disputes are the most painful, says Helen, who always goes through a property manager even when she lived next door to her rental.
“When stuff needs to be done, they’ve got the contacts, they know the good electrician who can come out on weekends,” she explains.
“Providing a home is a business in my view and I want to run it in as businesslike a fashion as possible,” adds the Crockers CEO.
Easier to find tenants than buyers
If trying to sell your home has been a deflating experience in recent months, you’ll find it’s a smoother process to find a tenant in the current market. Des Ryder says it typically takes from four days to two weeks to find a tenant in his market of Mt Albert and its environs, as long as the home’s been updated. Older stock is harder to rent, it might take three weeks and if it’s a four bedroom house with one bathroom that will be more difficult to appeal to families or groups.
What are homes renting for in Mt Albert in February 2023, a suburb hard hit by the recent flooding? A three bedroom house will rent at around $750 a week, a three bedroom two bathroom home at closer to $800 a week. A popular home will typically attract around 40 inquiries, says the property management director.
If a home is nicely furnished you can charge a little more, perhaps $100 a week more for a larger home or $50 a week more for a two bedroom, says Des.
Meanwhile in Mt Eden, another Auckland suburb which had its share of flooding, Mt Eden Ray White director, Jared Cooksley, says a 4 to 5 bedroom home will rent for around $1500 a week. That’s for a home with a full site, an ensuite to the main bedroom and a couple of living rooms. If it’s for a shorter period than the usual year lease then people might pay more he says.
It’s currently taking around two weeks to rent a home in his Mt Eden market and, while it was quiet prior to Christmas, the start of 2023 has been busy, even before the Auckland floods, says Jared.
The Ray White director notes that with upper end homes insurers are wanting to see property managers involved. “There’s a lot of maintenance on a bigger property,” he says.
Speak to a property tax accountant about renting the family home
Before you do anything about renting your home for the first time, you’ll need to speak to a property tax accountant about the effect it’ll have on your financial position. If it’s a house you’ve owned for years there shouldn’t be a problem with the brightline test when you go to sell again, but if you’ve changed the ownership to a new trust in recent years, you rent the home for a year or so, and then go to sell, you might be exposed to the brightline test, says tax accountant Peter Taylor of BDS Chartered Accountants.
“There are some serious tax issues when you rent out your home,says the accountant. It’s best to talk to your tax accountant as early as you possibly can, he adds.
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