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<title>How To Increase The Rent – Part #2 – Is My Property… | Opes Partners</title>

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How To Increase The Rent – Part #2 – Is My Property Under-rented? | Ep. 819

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Opes Partners

We mention our Auckland rental yield calculator and Christchurch rental yield calculator.

In this episode, we discuss what property investors need to do to increase the rent on their investment properties.
 
This includes how to figure out whether your property is under-rented or not. We mention our Auckland rental yield calculator and <a href="https://www.opespartners.co.nz/calculators/rental-yield/christchurch">Christchurch rental yield calculator</a>. You can use these tools to see how the yield on your property stacks up.
 
We also mention our upcoming <a href="https://www.opespartners.co.nz/webinar" target="_blank" rel="noreferrer noopener">property investment webinar</a>, which is happening on Tuesday 14th December at 7pm. Click the link to register.

speaker-1

Hello Dolly belong to the property Academy podcast. I'm hosting a kite and I'm in your neck. Oh and tell show we're talking about what is a good rental yield and we are continuing on with our three part series about how do you put up the rent on your property? Now everyone asks what is a good rental yield for my property and whatever I say See, somebody asked about this on the Facebook. I see people say it depends. It depends is what everybody says. Well, that's all well and great, but tell me what it depends on. Now, Andrew head simply away and said, can you find out what's a good rental? Yield in Auckland today? Now, what I've done is, I've gone, I've hired my Russian hacker to go through all of Trade Me, scrape, all of the rental property listings to find out. Well, what are the individual properties in what? Our Lourdes asking in terms of rent for those properties, and then we've gone through and scraped all of One roof. And we've tried to match up the rinse that's being asked for a property along with its current valuation in today's market. Now what that allows us to do is to estimate the gross, Guild of a whole heap of properties in Auckland and Christchurch and wherever we want so that we can understand. Well, what are the yields? What are the gross yields there? A property investor is willing. NG to accept in today's market. Now, the really cool thing about that is we can then plot all of those different data points. And I've got about 400 different properties in Auckland City that we can then say, well what are the trends? And what we can also do is draw a line of best fit and model out, create a formula for well what is the average yield based on what a property is worth? Because as we've established in earlier episodes cheap Properties tend to get higher rental. Gross yields more expensive properties tend to get lower gross yields but it's not a straight line. It's more of a curved line. So what I've done is I've been able to take that formula for both Christchurch and Auckland and we've created a calculator. Now, what you could do with this calculator and we're going to go through examples of this as you can put in what your property is worth and what it currently rents for. So, what it's worth in today's market, not what you paid for it, but what it's worth today along with what it currently Clear eats for and this calculator will tell you, are you above? Or are you below where we would expect you to be based on this model? Now, of course, it's not foolproof and naturally, half of the properties will be below this line half. The properties will be above the sign, but this should give you a sense of whether your property is potentially under or over. Rented, in today's market, based on what other property investors are accepting in terms of gross yields. Now, Andrew, that is all quite data here. And new day. So can you just take us through a couple of examples with these calculators? And of course, everybody listening to the show can access these for free. On the website will give you the links for that at the end but just walk us through how these calculators work. So people can get a sense of what are we actually talking about here? Sure, and actually, just before I do that, I'm just going to for any new listeners of the show newbie investors just want to explain how yield Works yield as your rent, your annual rent /, your value of your property and often people make The mistake of going /, their purchase price, which might have been three years ago and so the values going up, but the rent hasn't. And so they get an incorrect number. But the correct way of doing this is to take you gross weekly, rent, x 52, and then divide by your value. So I've used its fancy calculator and it is really good because it makes it really easy to understand. I put in two examples of properties that I've looked at just recently. So the Auckland one, first of all, I've put in a value of nine hundred ninety nine thousand dollars. And for the weekly rent, I've used Five dollars. The unit gives me a report that says your property. The gross yield is 4.0 3%, the expected, an Auckland has 3 point 33 for that price bracket, which means I'm actually getting 70 basis point, zero point seven percent above what the expected would be. So the rent per week, 775 expected a 640. So, an extra hundred and thirty-five dollars. So even though it doesn't sound like a lot .7, it's a lot when you think about an extra hundred, thirty five dollars a week, then what I I did as I entered a Christchurch example. So I worked on a value of six hundred and forty nine thousand dollars and a rent of 475 a week. So the gross yield on this property is three point. Eight, one percent with an expected of 3.94. So in this instance I'm actually 0.13% or 13 basis points under the expected. So the rent per week that's expected as actually 492 and I'm getting 475 so therefore I'm Seventeen dollars a week short of And new day. So can you just take us through a couple of examples with these calculators? And of course, everybody listening to the show can access these for free. On the website will give you the links for that at the end but just walk us through how these calculators work. So people can get a sense of what are we actually talking about here? Sure, and actually, just before I do that, I'm just going to for any new listeners of the show newbie investors just want to explain how yield Works yield as your rent, your annual rent /, your value of your property and often people make The mistake of going /, their purchase price, which might have been three years ago and so the values going up, but the rent hasn't. And so they get an incorrect number. But the correct way of doing this is to take you gross weekly, rent, x 52, and then divide by your value. So I've used its fancy calculator and it is really good because it makes it really easy to understand. I put in two examples of properties that I've looked at just recently. So the Auckland one, first of all, I've put in a value of nine hundred ninety nine thousand dollars. And for the weekly rent, I've used Five dollars. The unit gives me a report that says your property. The gross yield is 4.0 3%, the expected, an Auckland has 3 point 33 for that price bracket, which means I'm actually getting 70 basis point, zero point seven percent above what the expected would be. So the rent per week, 775 expected a 640. So, an extra hundred and thirty-five dollars. So even though it doesn't sound like a lot .7, it's a lot when you think about an extra hundred, thirty five dollars a week, then what I I did as I entered a Christchurch example. So I worked on a value of six hundred and forty nine thousand dollars and a rent of 475 a week. So the gross yield on this property is three point. Eight, one percent with an expected of 3.94. So in this instance I'm actually 0.13% or 13 basis points under the expected. So the rent per week that's expected as actually 492 and I'm getting 475 so therefore I'm Seventeen dollars a week short of I could probably reasonably expect for a property of that value. Now, what's important to note here is that these are based on what the average property investor is accepting based on the current value and the rent that they are asking, but there is variation within the. So what I mean by that, as while the average gross gills and Auckland City for a million-dollar property might be somewhere around the 3.2 Five percent. Mark in terms of gross yields, there are people, for instance, I can see one property here which is valued at 970 K and is achieving a 5.9 percent gross yield. Similarly I can see 1 million dollar property which is renting with only a 2.81 percent gross yield so there is variation here but when we talk about expected, we're talking about, if you were traveling a long that average line of best fit across the Market. So basically, if you were the average investor with the sort of property, now, of course there are some things we can't take into account. Obviously the sort of property that's going to yield really, really high as likely to be. Maybe a multi income property at might be specifically Geared for yield and might have a whole lot of bedrooms. Somebody's willing to pay a lot of money for it. Maybe the value hasn't gone up as much as had less Capital Growth, but the rents going up. There could be a whole heap of things that we can't see with in this. But what I'm trying to get across, is to get a sense of Where it does your property set compared to other property investors. Now, some property investors might only go for higher, yielding properties. And so want to be in the top 10% in terms of the Guild's, they're expecting others might be looking for a more normal property. If I could say one, that's not as Geared for yield like a standard house, or a standard townhouse, you know? And so is quite happy sitting more in the middle because they're expecting High Capital Growth. The main point about this is it gives you a sense of where you sit within the market, which is pretty cool. Now, The reason I'm quite excited about this is that it's a different way of looking at yields compared to how that traditionally reported in the media now. Can you just explain what I mean by that Andrew the difference between the way perhaps the media reports gross yields compared to how we're suggesting people should look at it in this instance, our measures looking at the rental yields that actual property investors are accepting not just working on what the median renters and the median value hours which of course would often give you a lower. Our percentage than what actually is being accepted in the open market. And the other thing is that it also gives a bit more nuanced and recognizing that, hey, the sort of yield that you're going to get. Also depends on your property's value. So if your property is really cheap, maybe it's a studio apartment, you're going to get a really high gross yield and it's not going to be worth very much. If you're reaching out a 20 million dollar mansion in the middle of room you are oh hey you're going to get a really low gross yield of maybe something like 12 1.2%. It's going to be really really low because you're just not able to get as much. For that. And so we've got to take that into account as well. Now the reason I wanted to include this in this series is that in tomorrow's episode, I'm going to talk about a property that I own, which is apartment and Christchurch. It's probably worth about 600 K renting for four hundred five dollars a week. Now, according to this model, it's under rented by about $75 per week. And so, that's a bit of a wake-up call to say, hey, look, yo in this apartment Apartments tend to be higher yielding but lower Capital Growth, actually you're massively under rented. Ed, you need to look at this and do a bit of a due diligence around. Well, what could you charge for this property? If you would have rented out again today? And so this x is in some cases, either a pat on the back. Hey mate, you're doing pretty good or a bit of a wake-up call of. This isn't a great rental property in terms of the amount of rent that it's generating computer was purchase. Price might want to take another look at this, see it ways you can get this up. So I think that is important. The other thing that I just wanted to mention before we continue on for our next show tomorrow, Andrew, is that the Rings of yields has been downward over time. And what I mean by this is that since 1993 that kind of median, rent compared to median, property value has been on the decline and the reason that's important to realize and I'll get into the numbers in a moment. Is that a yield that was achievable five years ago? Four years ago, 10 years ago is just nowhere near going to be achieved in today's market. So, if you're used to reading the Ed Dolph to roost book from when was that published Andrew? Probably a 1984. Something here, I was born. So if you're reading, they don't rely entry, we all know it's 1980 Fury. If you're reading some of those, I hope books that talk about Target gross yields. That might just not be achievable in today's market. So one thing that's really cool about this model and I'll link to where you can see the graphs as well. In the show notes is that this is based on what real property investors are accepting two. And today's market. And just to give you that sense of how much yields have declined back in 1993, in Auckland. Yeah, average gross yield, if we're just comparing media and rent, compared to b d and value, which is not necessarily the best measure, but this will give you a sense of the direction of travel yields measured. And that way, we're over 6% about six and a half percent in Auckland today. According to that measure, it's about sub 3 percent so around about 2.75%. So they've Fallen by about Two thirds now because of that, if you are reading a book from even the year 2000, or the year 2010, the yields mentioned in those sorts of books or blog posts just unachievable in today's market. And so this is why it's important to recognize. Well, what are people actually getting today, which is quite cool. Now, look before we go, we've got to tell you about. Where can I get this calculator? So we're going to link to this in the show notes. You know how to get there tap or swipe of cover out? The legs are there, but I'll also put this in the resources section on our website. So, if you go to our website, find the resources section up at the nav, you'll find it in the air and we'll call it something like Auckland yield calculator Christchurch yield calculator, so you can play around with us. And then in tomorrow's episode, make sure you tune up because we're going to go through that case study of how you then use this to figure out. Well, what do I need to do to figure out what my property should actually rent for? It's going to be extremely practical, so you're able to follow these tips along at home. Look, let's wrap it up there, but please don't forget to rate review And subscribe to the podcast, really does help us get them. She out to more people and I'm just going to run my correction now I've just looked up, don't truces books came out in about 2000 so so that was probably when I was starting reading those books, it just feels like a long time ago. And if you want to hear Andrews property predictions for the year 2020 to come along, to our upcoming webinar, that is happening on the 14th. December at 7 p.m. that sticks Tuesday. You want to come along to that tap or swipe over the cover art, drop a link in there or just going to up his pants. Not counted in seed and you can register there. Thanks for listening to the property Academy podcast. I'm your host a big night and I'm Andrew niccol. We're gonna be back again tomorrow with even more daily, strategies tips, and insights to help you in the Vise after you see on property Market. Until next time,

How To Increase The Rent – Part #2 – Is My Property Under-rented? | Ep. 819

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How To Increase The Rent – Part #2 – Is My Property Under-rented? | Ep. 819

About this episode

Read transcript

OCR Slashed What it means for interest rates ⎥ Ep. 1856

3 clever negotiation tactics when buy a property ⎥ Ep. 1855

Cross-lease to freehold conversions – how much money can I make ⎥ Ep. 1854

How long do the good times & bad times last Tony Alexander ⎥ Ep. 1853