When you own an investment property, it’s natural to want to achieve the highest possible rent.

After all, a higher weekly rent means more income, right? Not necessarily.

While achieving a strong rental return is an important part of property investment, there’s more to consider than simply chasing the highest figure the market might support. Sometimes, keeping a great tenant at a slightly lower rent can actually deliver a better overall return.

The $20 question

Let’s say you have an excellent tenant paying $500 per week.

They’ve been in the property for some time, look after the home, pay their rent on time and are easy to deal with. A rental review suggests the property could potentially achieve $520 per week in the current market.

At first glance, increasing the rent by $20 a week seems like an obvious decision. That extra $20 adds up to $1,040 over a full year.

But what happens if the tenant decides the increase is too much and chooses to leave?

If the property is vacant for just two weeks while you find a new tenant, that’s $1,040 in lost rental income at $520 per week. In other words, two weeks of vacancy could wipe out the entire year's additional income from the rent increase.

That’s before considering the other costs and work associated with a change of tenancy.

A good tenant has value too

This is why the value of a good tenant shouldn't be measured solely by the weekly rent they pay.

A reliable, long-term tenant who looks after the property, pays on time and communicates well can provide significant value to a landlord.

There’s also the benefit of continuity. A property that remains occupied avoids the potential loss of income that comes with vacancy, as well as the time and expense involved in finding a new tenant.

That doesn’t mean landlords should avoid increasing rent when the market supports it. Regular rental reviews are important, and understanding what your property could reasonably achieve is a key part of good investment management.

It simply means the decision shouldn't be based on the weekly figure alone.

Look at the bigger picture

When reviewing rent, there are several factors worth considering:

• What similar properties are actually renting for
• Current demand in the local market
• How long the current tenant has been in the property
• Whether the tenant consistently pays on time
• How well the property is being maintained
• The likelihood of the tenant accepting the proposed increase
• The potential cost and risk of vacancy

A rental appraisal gives landlords valuable information about the current market. It doesn't necessarily mean you need to push the rent to the absolute maximum.

The right decision depends on the individual property, the tenant and the current market conditions.

Sometimes, stability wins

There will certainly be situations where increasing the rent is the right decision.

If the current rent is significantly below market value, demand is strong and the increase is reasonable, bringing the rent into line with comparable properties may make perfect sense.

But there will also be times when a smaller increase or even maintaining the current rent makes sense because retaining an excellent tenant provides greater certainty and value in the long run.

For landlords, the goal isn't simply to achieve the highest weekly rent.

It's to achieve the best overall return from the investment.

That means regularly reviewing the market, understanding your property's position and considering the whole picture before making a decision.

Because sometimes, an extra $20 a week isn't worth losing a tenant who's worth much more than that.

Looking for advice on the current rental value of your investment property? The Peter Lees Real Estate property management team can provide an up-to-date rental appraisal and help you understand your options.