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Property Managers Distorting True Market Rent

By 2AK - 16 January 2013 21

As a property investor for more than 20 years, I have a few rentals in Canberra. I want to highlight a practice that is rampant here in Canberra by Real estate agent/property managers whereby the true value of market rent is always undervalued by $30 to $40 per week on a typical 2 to 3 bedroom rental property.

This is to ensure that they get a cast of thousands at the door at inspection time. Then they go through the applications with a fine tooth comb looking for executives or professional with high income.

This is because these types of tenants usually require less management, fewer hassles and more time for them to take on additional properties to manage to earn more money for minimum work.

In the meantime 90% – 95% of the people who attended the inspection will have wasted their time unknowingly because their application will inevitably be rejected.

I am annoyed that the interest of the property owners are not represented because they are losing significant money each week in addition to the 7% to 10% (of weekly rental income) for management fees owners are required to pay each week.

This is why all my properties are managed by myself and all of my rentals are $30 more than Real Estate managed properties. As an example, I have a 2 br property in Lyneham (60 Wattle St Lyneham) with weekly rental of $360 for the last two years and currently a Real Estate agent is listing pretty much the same property for $330 per week. I feel sorry for the owners.

Advice, if you have the time rent your property your self privately or asks your property manager why is rental price less than privately listed rental?

What’s Your opinion?


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21 Responses to
Property Managers Distorting True Market Rent
justsomeaussie 11:19 pm 16 Jan 13

The book Freakonomics has a good write up with real world data on real estate agents. Simply a small increase in rent or sale price isn’t worth their time simply because they are only making a sub 8% return.

So for the owner getting an extra $10 per week in rent or 10k on a sale is great, for the agent it’s really pennies and not worth the extra time they have to devote to finding someone who’ll pay more.

If anyone doubts this the US data is there for anyone to go though. Not hard to do the figures for here.

Grail 10:43 pm 16 Jan 13

2AK, you are tilting at windmills. You are doing a lot of supposing and presuming and assuming.

Your story is confusing, too. You rented your place two years ago, but then you mention five weeks, but the other place is still not rented … what is going on here?

Also, your statistics are meaningless: regardless of how many or few turn up to view a property, there can be only one tenant. It’s not a statistical measure, it is an absolute. To have 90% of applicants rejected means you had 10 applicants, and you accepted one.

As for people who are students, single, or otherwise don’t fit the DINKY mould, just make sure you get in early to be at the top of the list. The property manger isn’t looking for perfect tenants, they just want the first decent tenant they can get a signature from quickly.

But 2AK really needs to get that story straight before we can start handing out cookies for being canny enough to rip someone off to the tune of $20/week.

arescarti42 9:41 pm 16 Jan 13

2AK said :

The reason I believe the property at Lyneham is still not rented is the agent is looking for 5 star model tenants and not your average Joe. In the mean while owners have lost $1650 in lost rent for the 5 weeks that’s vacant. They don’t care how long a property is vacant, it’s not their money all they care about is getting the best tenants this will lead to less work. My concern here is the absence of middle ground.

You may be right on that, although I wouldn’t have thought that’d be a particularly successful strategy. High income senior professionals probably aren’t looking to rent 50 year old un-renovated flats, and if it stays on the market for too long, surely the owner will ditch them for another agency.

2AK 9:01 pm 16 Jan 13

I do agree that rental prices have soften, but in saying that I rented my Lyneham property
two years ago at $360 while other RE were advertising theirs for $330 while the rental market
was hot.
The reason I believe the property at Lyneham is still not rented is the agent is looking for 5 star model tenants and not your average Joe. In the mean while owners have lost $1650 in lost rent for the 5 weeks that’s vacant. They don’t care how long a property is vacant, it’s not their money all they care about is getting the best tenants this will lead to less work. My concern here is the absence of middle ground.

LSWCHP 8:50 pm 16 Jan 13

Grail said :

I really appreciate your concerns that property managers are working hard to keep rental properties affordable, while also selecting low maintenance tenants. I am angered that they are not pushing rental prices sky high and keeping up a steady flow of property damaging drugged up rock stars through my property.

Wait, what … ?

My thoughts exactly. Offering a good price in order to attract high quality tenants who will look after the property seems to me to be something like…ohhh…I dunno…common sense, or good business practice, or something like that.

And how exactly does one justify a price differential of nearly 10% over similar properties to prospective tenants? “You should pay me $360 instead of $330 for that identical place next door because ummm…because ummm…I want to make more money out of you!” I’m sure tenants would be flocking to sign up to that proposition.

Dork 8:46 pm 16 Jan 13

I agree with selective choice in tenants. Me and my partner applied for over 30 rentals places a little over a year ago. We looked at over 40. Each application we were told that we were too young and had no referances. I think this is crap, how is a 19 year old that can’t live at home anymore supposed to get a rental? Also, it’s not like we were unemployed, I’m a public servant and my partner works for a private company. We eventually got one out of town and then a year later they put it up $20 a week even though the place was in worse condition (general wear of carpet etc) than when we got it. They just do whatever the hell they like. Rentals are crap.

justsomeaussie 8:39 pm 16 Jan 13

As someone who attended those rentals where 40+ people would turn up, I wondered why I was never getting a look in even though I was a professional and even once offered $20 over the requested rent.

So I asked a Property Manager friend and she told me the inside story. When agents have a lot of people interested, they only read the first 10 applications and simply choose the first suitable person without bothering to check anymore.

Her simple tip was to be the first one in the door with a pre filled in application, be nice and friendly and tell the agent you are very interested.

Now I’m on the other side owning with a tenant, the advice from the same friend was since it was my first rental property use an agent for the first twelve months to get familiar with how it all works. If you get a good tenant eith minimal issues manage them yourself from then on.

G.R.R 7:44 pm 16 Jan 13

I dont understand…are you giving yourself props for charging more than real estates?

Spykler 6:50 pm 16 Jan 13

I don’t understand how you came to this conclusion- I have three rental properties and they are aligned with private and property managed rents. True, it does save you a bit in fees if you do the management yourself, but I always do my homework when setting the rental price and it always is only about $5 different (at the max) from most other similar properties on Allhomes.

drfelonious 6:29 pm 16 Jan 13

I think you need to take a closer look at the market there Daddy Monopoly Scrooge Warbucks.

You might find that RE agents tend to overstate the market rent much more often than they pitch it at the market – this has contributed to a sharp and sustained rise in the number of properties for rent in Canberra.

paganava 6:28 pm 16 Jan 13

If you aren’t well off with a great job and at least 2 people applying – don’t bother with a real estate.
Being a single parent- one reasonable income plus centrelink payments , I’m sure the agents don’t even hand my application along.

Grail 5:46 pm 16 Jan 13

I really appreciate your concerns that property managers are working hard to keep rental properties affordable, while also selecting low maintenance tenants. I am angered that they are not pushing rental prices sky high and keeping up a steady flow of property damaging drugged up rock stars through my property.

Wait, what … ?

arescarti42 5:42 pm 16 Jan 13

Maybe that was the case, it certainly doesn’t seem to be now. I rented my current place through a RE agent, and they didn’t seem to have any issue with the fact that I was a student with no income or rental history.

Similarly, at many of the places I inspected, I was either the only one or one of only a few people who bothered to show up. There’s also plenty of rental stock languishing for months on the market, so I don’t think you can say that agents are listing prices too low.

Rents have fallen a lot in Canberra recently. The unit you mention in Lyneham at $330 a week has been advertised on allhomes for over 5 weeks, if it was under priced, it would have rented long ago. If your place is indeed very similar, I doubt you’d be getting $360 for it if you had to get new tenants.

phil m 5:36 pm 16 Jan 13

I don’t agree that the rent prices in Canberra are understated.

cross 4:52 pm 16 Jan 13

Sounds like a 1st world problem to me.Are you sure your not just shirty because your being undercut.

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