Too many rental owners don’t take the time to make sure they set the right rent for their rental home. This is a critical decision in Sacramento rental property management and can cost you thousands of dollars over the years, but perhaps not in the way you may expect. Here are the top ten things to consider before setting the rent—from your expert team at Select.
- First, and probably the most obvious to many investors, is to avoid UNDERPRICING the rental home. Not only does this result in less rental income for you, it becomes more difficult to make reasonable rental increases in the future to keep the rent consistent with market rates, whether your working in Cameron property management or Sacramento rental property management. This can keep your rental underperforming for many years.
- And of course you don’t want to price it too high, either. If your property is OVERPRICED, it will be difficult to rent it quickly to well-qualified tenants. That will mean a longer vacancy period for you, which over the course of the coming year can be far more damaging to your overall rental income than a lower rent rate. Remember that you won’t earn any income at all if you have to wait for someone who is willing to pay a too-high price, and this can quickly erase the increase rent income over the year.
- Start by considering your property’s LOCATION, always a primary factor with real estate, be it a sale or rental. If your home is in a desirable school district, it will be easier to draw families with school-aged children to your home. Properties that are close to public transportation or popular commuter routes are also sought after, and can usually earn more rent than homes in more remote areas. Feature the location’s benefits when you’re marketing and advertising as well.
- Evaluate your property SIZE in relation to similar properties. Depending on where your property is located, you’ll earn more when you have the size and the layout that tenants are seeking. Three bedroom, two bath homes with a garage and a yard command the most rent in suburban neighborhoods. If your property is of smaller size, you can compensate with modern appliances and upgrades.
- Like it or not, SEASON of the year can influence rental prices. Families with children are less likely to move during the school year, and no one enjoys moving over the holidays. Areas around a university will see fluctuations around the semester breaks. As a result, prices may be a little higher in the early summer months, and a little lower in the dead of winter.
- One area where you have more control is the property’s CONDITION. Put simply, a home that’s in great shape can command more rent than a home that is dated or run down. If you want to attract top rents, make some improvements and updates. You don’t have to do a complete remodel, but a fresh coat of paint on the walls, tidied up landscaping, new lighting, or modernized flooring can make a difference in what you can charge.
- Whether or not your property accepts PETS can also impact your rent rate. As single family rental homes are popular with families, allowing certain family pets will drive more interest to your property, allow for a stronger rent rate, and ultimately can cause a home to lease faster. Good tenants are likely to take care of the property, pets notwithstanding, and pet deposits can be put in place to protect against any damage.
- In light of all the factors above, now consider the COMPETITION. Plenty of online resources can help you understand your local market and your tenant pool. Talk to property managers, real estate agents, and investors. Pay attention to what is renting quickly in your area, and what isn’t. Is there is low inventory but high demand for rental homes? If so, you can charge a little more for your property. If there are plenty of great homes available to tenants, you’re going to need a more competitive price to get it leased quickly. Compare the location, features, size, and condition of the available properties to your own, and adjust your price accordingly. Also, remember that just because another owner asking $1,500 for a property doesn’t mean that’s what the property will actually lease for.
- Of course every rental owner will want to first consider their FINANCIAL position, but remember, this can’t drive the final price. Perhaps you want to earn $1,250 a month in rent because that will cover your mortgage and your expenses, provide a little maintenance savings, and even a bit of monthly income. But, if homes similar to yours are renting for $1,100 per month, your price tag may leave you with a costly vacancy or an undesirable resident who is willing to pay more due to credit or other problems.
- Finally, consider a complimentary rental analysis from the expert team at Select to get a fact-based, reliable price range that’s appropriate for your property. We specialize in the local market and have access to several tools to provide you with an unbiased assessment that can help you confidently set your rent rate.
Once your rent is set and your property is on the market, there are two more steps to ensure that you’re asking the right rent rate for Sacramento rental property management:
- First, make sure you MONITOR LEASING ACTIVITY. If you are getting consistent inquiries and prospective tenants are asking to see the property, you’re probably in an appropriate rental range. But, if no one is calling or applying after viewing the home, you might be pricing it too high. Track your marketing results, including the number of people who are contacting you, how many of those prospects are seeing the home, and whether they’re filling out an application after the showing. This will tell you whether you’re in the right range.
- ADJUST THE RENT IF NECESSARY. If it turns out that no one is applying for your home, the price could be the problem. Consider lowering it to lease the home more quickly, and try not to get too emotionally attached to the amount that you charge. Losing an entire month of rental income is more expensive than lowering your price by $50 per month.
Once you have a tenant placed, you may have questions about raising the rent for existing tenants.
- Most tenants assume that their rent will increase at some point after the initial lease period. This is appropriate if the market supports a higher rent for properties like yours, your property-related expenses have gone up, or you’re offering additional value, such as landscaping, internet, replacing aging appliances, etc. Remember, not all markets will move at the same pace, Cameron property management won’t be like Sacramento rental property management.
- That said, you don’t want to rush good tenants out of your property with risky price increases. The costs of turnover, marketing, re-leasing, and potential vacancy days often outweigh a small rent increase, so weigh your choices carefully and keep the lines of communication open.
Again, your team of experts at Select is always happy to help you determine the correct rent rate for your property at no cost to you. Give us a call today.