The four key signs your rental property is underperforming

With Perth’s rental market recording strong growth over the past 12 months, many investors may be wondering how their own property is performing in the context of these broader market conditions.

While rent increases can certainly play an important part in driving increased returns, there are many factors that come together to influence the overall performance of your rental portfolio.

So, what are the tell-tale signs that your portfolio is underperforming?

1 – You haven’t reviewed your rents in over 12 months 

No matter the current state of the rental market, it’s crucial that you’re regularly reviewing your investment property to keep it aligned with market conditions.

Many investors only review rents when an existing tenant vacates, which in some cases can be upwards of two years.

However, REIWA statistics show that median rental prices in Perth grew by over 12% in the year to February 2022 alone. This means if you haven’t reviewed your rent in over 12 months, there’s a good chance your property may be leasing below market value.

Increasing rental prices isn’t always straightforward, especially if you have a great tenant in place. Our property management experts discuss how to balance these two critical factors in our recent article.

2 – You haven’t been proactively maintaining your property 

Many property investors take an “as it comes” approach to maintenance, only addressing issues with their rental property as and when they arise.

Being more proactive in your property’s upkeep can be critical to maintaining steady cashflow. Most importantly, it helps you identify potential problems before they escalate into costly damage.

In addition to regularly inspecting your property for signs of wear and tear, your property manager should also be encouraging you to opt into regular servicing for items such as cleaning of gutters and timber pest inspections, as well as compliance checks of safety items such as RCD and smoke alarms.

The small fee for maintaining these items on an ongoing basis will be a lot more favourable than the larger sum you may need to pay for non-compliance, or if a small issue (for instance a minor leak) is left unattended and evolves into significant damage.

Take your free performance check

3 – You’ve never considered value-add improvements

Tenant demands and market conditions are constantly evolving. While this can be challenging, it also provides plenty of opportunity for investors to identify new ways to nurture their property’s performance.

A good property management strategy will go beyond simply maintaining your property, to actively identifying opportunities to build on your property’s market rent and value.

Even minor cosmetic changes can make a big difference when it comes to increasing your property’s appeal, especially if it’s been some time since your property was last on market for lease.

Of course, there are many ways to invest money into a property without actually enhancing its value.  A good property manager will be able to provide objective advice on which improvements offer the strongest return potential, and which items hold strongest appeal with tenants.

4 – You haven’t reviewed your finances in the last 12 – 24 months

Property owners often miss out on returns because they view rental management in isolation from other aspects of their property’s performance.

In reality, managing (and maximising) your portfolio  is about more than tenant management alone. Other aspects, such as ensuring you’re getting the most from your property finance, can be equally critical in optimising your cashflow and ensuring you’re getting the returns you deserve.

The best property management strategies will consider these factors in tandem with your rental performance, rather than in isolation. So if you haven’t reviewed your loan in the past year – especially given today’s low interest rate environment – consider doing so to ensure you’re not missing out on potential savings.

Take your free performance check