Pricing your rental property correctly is an important factor that can greatly affect your profitability. As a rental property owner, you should know how to set the right rental rate to stay ahead of the competition and maximize your profits.
If you price your rental property too high, you will likely drive away potential quality tenants who cannot afford your price range. Similarly, if you set your rental rate too low, you will also miss out on opportunities to earn maximum income and risk attracting potentially problematic tenants.
To find the right balance, landlords should know the factors that affect the rental price in a real estate market.
Factors That Can Affect Rental Rates
One of the most challenging tasks of owning a rental property is setting the
correct rental rate. When pricing your property, you need to do proper research based on several factors, such as the following:
- Economy:
The local economy can greatly impact the performance of a rental market. In general, if the economy is doing well, the population will most likely rise, causing an increase in demand for housing.
- Demand for rentals:
Rental rates will vary per location because there are different demands for rentals. The demand for rentals in your local area is an ultimate basis for the rental rates. Typically, high rental demand will cause the rental price to go up.
- Available competition:
With a high demand and low supply, rental prices will most likely rise. If there are a lot of available rental properties that can cater to the demand in your location, your rental rate will be affected because it means you cannot charge as high.
- Amenities:
Rental property owners who offer more amenities can reasonably charge a higher rental rate. To add value to your property, make sure to offer amenities that are desirable to tenants.
How to Price Your Rental Home Correctly
Setting the wrong price for your rental property can be risky. If you price your rental too high, you limit your opportunities to get your property occupied. Long vacancies can be detrimental to your
profitability and ROI. However, if you price it too low, you also limit your income potential. Plus, you also risk not being able to attract quality tenants because cheap rates may be misconstrued as low value.
To help you find the correct pricing for your rental property, make sure to keep the following tips in mind:
1. Study the rental comparables to find the right price.
Studying and analyzing the rental market is an important step to finding the right rate for your rental home. To study the market, you should find comparable properties that you can use as a basis for your pricing.
The best rental comps are those that have similar features as your property. Make sure to include only those that are located in the same neighborhood as your rental unit, or at least within the same area or city.
- Location: The location of the comparable properties should be the same as yours. You cannot compare properties located in different areas or cities even if they have similar features.
- Property type:
If your rental home is a single-family home, find other similar single-family houses within the same vicinity. You cannot compare the price of a single-family home with an apartment unit.
- Property size:
While it’s difficult to find two properties of exact similar sizes, try to find comparables with sizes that are closer to yours.
- Number of bedrooms and bathrooms:
Consider the number of bedrooms and bathrooms when finding rental comps. It’s best to find a home with a similar number of rooms as your property.
2. Assess the value of your rental property.
After looking at the rental comps and how much your competitors are charging for their rental homes, the next thing that you can do is assess the value of your rental property based on your amenities. The rule of thumb is to charge rent based on how desirable the property is.
Here are the factors that you need to consider when assessing the value of your rental home:
- Home improvements:
Is your rental home
recently renovated? Did you install some value-added improvements? Make sure to consider these when assessing your property.
- Appliances:
Appliances are important amenities to tenants. If you provide them, make sure to take them into consideration when pricing.
- Additional features:
Whatever additional features that make the rental home more desirable to renters can be considered into your pricing. A few examples of this include an extra closet, additional parking slot, security system, and smart-home technology.
3. Work with a professional rental property manager.
Some rental property owners are not comfortable going through the hassle of analyzing rental comps and assessing the value of their rental homes on their own. After all, doing this process all by yourself can be tedious and time-consuming, plus it can also be prone to error too.
For example, gathering data for rental comps can be very laborious, especially if you don’t know where to find this information. If you don’t find accurate data, it can greatly impact your calculation, which will also result in wrong pricing for your rental home. This is something that you want to avoid, and may want to
hire a property manager to be sure of it.
If you are not sure if you can set the correct price for your rental property, it’s best to hire a professional rental property manager instead. Property managers are knowledgeable about the rental trends in the area, so you can be sure that they know how to set the pricing right to help you achieve your maximum income potential.
Choose a rental property management company that won’t only help you price your property, but will also help you find the right tenants. Also, make sure that the property manager is knowledgeable of the area where your property is located and is always up-to-date with the status of the rental market.
Bottom line.
If you need a property manager in
Charlotte, NC, reach out to
Dawson Property Management at (704) 438-9834 and we will be happy to assist you! We also offer a free rental analysis, so get in touch with us today!
