It’s easy to get attached to the idea of squeezing as much money out of your property as possible, but at what cost? What if it sits on the market empty for three months, because you pushed for an extra hundred dollars? That’s three months of rent that’s not filling your pockets or helping you pay your bills.
Yes, there are competing interests. You need to make as much money from your investment property or rental, but you need to be competitive to the market to find a tenant.
Landlord Tips Video: How to Set Rental Pricing
When setting your rental pricing, these are the points to focus on:
- What does the market dictate?
- What are comparable properties renting for?
- How to maximize your pricing, while not sitting on the market too long
- How to think like a tenant when setting your pricing
- Use tools to help you analyze pricing, but only for a guideline
What does the market dictate? This is an important consideration. You need to look at both where you are geographically, not what people are getting for pricing across the country and average it. Each location will dictate what the going rental rates are. To move your rental quickly, you’ll want to be competitive in your market, not the market across town.
What are comparable properties renting for? Comparable means things like how many bedrooms and bathrooms you have, square footage, homes in the neighborhood that are similar. Mixed neighborhoods that combine condos, townhomes, and singles may skew what you see, so make sure you’re working with homes that are similar to the one you’re renting.
Maximize pricing without sitting on the market too long. Yes, you might squeeze fifty more dollars out of a tenant if you hold out an extra few months to find somebody, but was it worth giving up those few months with no tenant and no money coming in? You want to look at the average of the comparable homes and be in the mid to low-middle range of those prices to move quickly. Be sure you’re one of the first homes somebody adds to their list. Don’t miss out over a few dollars, because you were stubborn.
Think like a tenant. Your potential tenant doesn’t care if you have sentimental attachment to your home because you raised your kids there. They care that it’s close to work, in a decent school district, and has the space they need. They aren’t emotionally tied to your home like you are. Don’t let your emotions set your price, or you’ll miss the boat on finding a tenant quickly.
Use tools to help you get pricing ideas. Online tools can be helpful, but keep in mind that they don’t have the human element to them, which means you’re getting a guestimate based on an algorithm. And that algorithm may skew low or high because of the neighborhood that’s two blocks away. They are a great resource to give you a ballpark idea, but it’s not wise to completely rely on them because there are factors that they simply can’t know, since they are machine based. Comparable properties are a more reliable element to consider.
Your goal is to get somebody into your home quickly (side note: is your property marketing properly supporting your pricing?). An empty property isn’t offering you value the way a tenant filled one does. You don’t want it sitting on the market for too long, because people will wonder what’s wrong with it, because it isn’t moving. Don’t be the home that simply can’t be rented out because the landlord clung to an unrealistic rental price.
Resolute Property Management’s lease management services help set the right price for landlords, in addition to creating an air tight lease for landlords. Ensure your price — and your lease in total — add up to support your goals.