Owning a rental property comes with many challenges, but few of them are more complex than setting the right rent. Many owners often want to get the highest rent possible from their investment, however forget that it’s the market that often drives the price it will pay. We at Opal Estate Management recommend owners think of the return from the investment not the rental price. Set the rent too high, and the property could sit vacant for days – or even weeks – on end. In trying to get a few more dollars in rent, you could be foregoing hundreds or thousands of dollars in rent by having it vacant. Now does that sound like a good return to you?
The solution top property management companies deploy is to run rental comps in the area, combined with a property inspection and demand analysis. . When done , and the right rental price set, it will ensure you attract prospective tenants so the property won’t remain vacant. Here’s how these methods work:
As the name implies, the purpose of obtaining rental comps is to compare recently rented properties with similar features in the same neighborhood. They’re like running sales comps, with one key difference: instead of estimating a list price of the property, rental comps indicate what the ideal rent range should be for your property
Though no home is ever the same as another, a qualified professional should be able to provide a rental range that considers all the details that can make a difference. For example, one property could have brand new appliances, whereas the other one doesn’t. Most tenants consider an updated rental property more valuable, which makes them more likely to pay higher rent.
Once a property manager has a rental range from the comps, the next step is to inspect the property to verify its condition and features to see where within the rental range the property should be (e.g. higher or lower). Conducting a a property inspection is the key to seeing where along the rental range your property is and if it’s worth it or potentially more.
As a final step, a good property manager will also analyze the demand for rental properties like yours. Data from the rental comps can show you how long properties like yours tend to stay on the market. If the comps show that your type of property moves quickly then again it would put you into the higher end of the rental range.
Once the demand analysis is complete, the property manager should be able to give you a definitive recommendation on the right rental rate for your property. Obviously, you can still request they advertise it higher, however you run the risk of having it sit vacant for longer and lessen your return.
As you can see, there’s no one-size-fits-all answer for setting your rent. That said, rental comps property inspections, and analyzing demand help define a rate that’s profitable for you and acceptable to tenants.
If you would like to talk about what your property could rent for and receive a complimentary rental rate evaluation as described above, please contact us at Opal Estate Management.