Congrats on your new condo purchase. It’s a significant milestone in your investment journey.
You diligently studied the property market and got in at what you think is the right time.
And now, all that’s left to do is to find a tenant. Yes, you’re renting out your spanking new private apartment, fully furnished.
As a person who’s always well prepared, you’ve done the necessary calculations. To get a rental yield of 4%, you need to rent it out for $4k a month.
Any takers, you ask.
You contacted several agents, who duly put up advertisements per your requirements.
Alas, after a week there’s still no taker at your asking price. Highest offer is a pathetic $2,700, and only for a 1-year tenancy.
Should you bite?
Let’s do the maths.
If you take the offer, you’ll get $2,700 x 12 = $32,400 in one year.
Should you decide to wait, you will be incurring the opportunity cost of $2,700 for every month you leave the condo empty.
If you finally get it tenanted one month later, it needs to fetch a rental of $2,945 in order to match the $32,400 you could have earned in the same timeframe.
Two months later, the figure will be $3,240.
Three months, $3,600.
You get the idea.
So, armed with this knowledge, you need to quickly decide whether to accept the current highest offer.
Should you accept the $2,700 offer?