Running a rental operation can be a pretty solid business but sometimes, setting the right rent price can be quite challenging. Obviously, you don't want to set the rent too low because there is no point in running an operation that does not generate any profits for you. At the same time, you do not want to price your property too high because then you will not be able to attract tenants. Thus, the challenge is to find the middle ground.
Here are a few tips on how you can find the optimal rent price for your property:
Know the Value of Your Property:
First and foremost, you need to know how much your property is worth. This can be done by conducting a real estate market analysis. The value of your property is generally dependant on the property's location, size, age, conditions, improvements and enhancements, various features, amenities etc.
Calculate the Rent Based on the Value:
The general rule of thumb is to charge the rent in the range of 0.8 to 1.1% of your property's value. For a property that is worth $100,000 or less, you can charge between 1 to 1.1% and for properties that are worth $350,000 or more, you can calculate the rent at 0.8% of your property's market value.
Know the Market Rate:
While that formula for calculating the rent will give you a basic rent price that makes sense, you also need to check the rental rates around your property. If your rent is too high compared to similar properties in your area, then there is a very high probability that your property will not be an attractive option for prospective tenants. The most effective strategy in such a scenario is to charge a similar rent price as long as you know that these properties are similar in size, resources and other aspects. However, if you distinctly have something better to offer, then you can go ahead and charge a higher price for that particular feature. For e.g. if your property has a better view compared to another, similar sized property in your area, you can demand a higher rent price. Similarly, if your bedrooms are bigger or if your property has extra bathrooms, you can put a price on that. If you provide more utilities or have more amenities, go right ahead and maximize your profits based on the features you offer on your property. The key thing to remember is that you should have something value to offer. Charging tenants exorbitant rates for something that is already available at a lower price makes no business sense.
Follow the Basic Principle of Demand and Supply:
It is a given that any product/service, when in demand, can command a higher price. Rent prices are no different. If you have a seasonal property for instance, a beach house or a lake house, a cottage near the falls etc. you know that you can charge a higher rent during summer and spring as those are the months when more people rent cottages, beach houses etc. During off-peak months, you can offer discounts and promotions so that you can still generate some income. The lower price during low demand months can easily be compensated during your peak months. It's just changing the rent as per the market dynamics of demand and supply which can be a very effective pricing strategy.
Renting your Airbnb Property:
If you have a property on Airbnb, you can still follow the same strategies that apply to traditional properties but with some small amendments. Many properties on Airbnb charge their tenants a nightly rate. You can determine this rate by simply dividing your monthly rent by 30. Thiswill give you an approximate rent price per night. You should also compare your nightly rate to the rent rate of similar properties around the location of your property. If you want to stand out, you can offer added utilities or amenities that are not offered by other properties. Another good way of attracting prospective tenants is to offer a low rent price. This is especially useful for owners who are new to Airbnb and do not have any reviews or credibility on thesite. Once you have a few good tenants and some reviews, you can slowly increase your rent. This way you establish credibility and can attract better tenants. Airbnb rent prices are also dependent on demand. Prices per night can be higher during weekends, long weekends, summer and spring season, special events and festivals etc.
Keep in mind that your rental property is an investment and you need to ensure that as long as you keep within the market rates, your goal is to generate profits on your investment. This does not mean that you charge atrocious rent prices but this does mean that you understand the property area, the market, the rent trends, the high and low seasons and the property value and you use all these factors to determine the optimum rent price for your property.
Many people today earn decent enough incomes by renting out their properties. Some use it as a strategy to earn their partial mortgage payments through rent while others are in the business of managing and renting out apartment buildings, town-home communities and condominiums.
Whether your rental operation is big or small, there is no doubt that the quality of a tenant is extremely important. When you do find good tenants, it is well-worth your time and money to ensure you can retain them. One of the easiest ways of retaining tenants is by maintaining your property and providing exceptional service.
Here are some great tips on how to be a successful landlord:
Make Timely Repairs:One of the biggest pet peeves of tenants are landlords that do not make timely repairs. Therefore, as a landlord, if you are notified of something that is not working properly, is broken or needs to be replaced, make the required repairs as soon as possible. Keep in mind that delays can result in your tenants becoming disgruntled and dissatisfied. In addition, they may withhold rent or sue you for an injury related to a defective appliance, broken steps etc.
Minimize Your TurnoverThis can simply be achieved by keeping the property clean, tidy and safe. This may mean cutting the grass regularly, picking up trash, replacing carpets and painting the building. Most of these chores do not require a lot of money but only labor. If done properly and regularly, you can ensure that both your property and your tenants fare well in the long-run.
Secure Premises:Make sure your property is secure as this not only keeps the tenants safe, it prevents outsiders from damaging your investment. Premises can be secured through fencing, a proper lighting system and/or video surveillance. The safer your tenants feel, the more likely they are to stay long-term.
Disclose Hazards:Sometimes you may have a water leak or a broken stairwell. If this is the case, make sure you notify your tenants about the hazards. Place clear signs that are visible for all to see and ensure there are no mishaps. The last thing you want is to be sued by the tenant for any injury that may occur due to this hazard.
Insure the Property:No matter how perfectly you run your rental property, get adequate liability and property insurance. We live in a world where people are happy to sue at the drop of a dime. You want enough insurance to protect you from any injuries suffered by your tenant, damage to your rental property (fire, vandalism, burglary) or any type of discrimination lawsuit.
Do Not Increase Rent Abruptly:One of the most common reasons why landlords lose tenants is a sudden increase in rent. This is not to say you can’t ever increase the rent. You can, as long as you do it strategically. Alert the tenants of a rent increase in the near future and give them sufficient time to settle to that fact. Increasing rent requires a delicate balance between your property's’ value and what your tenant can afford. When you decide to increase the rent, conduct a rent survey to find out the average rent in the surrounding area. Make sure you're not overpricing or you risk losing your tenants.
Be Understanding:Do not penalize tenants for every little mistake or slightly delayed rental payments. Be kind and show some respect and in turn these tenants will always look after your property and respect you in return. This does not mean you let them stay for free. Be sure to communicate your rental policies. Make sure they know you are running a business but being understanding once in a while is not going to harm you in any way.
Avoid Legal Situations:No matter how good a landlord you are, there will always be disputes with some tenants. The best way to get around these hassles is to be patient and resolve these issues amicably. Going to court is an expensive undertaking- and there really is no sense in evicting people on minor issues.Therefore, if the issue at hand can be dealt with internally, do it and come to a compromise that is mutually beneficial for both you and the tenant. If there is money involved, try small claims court first.
These tips outline how landlords can retain tenants by simply maintaining their property, being civil and understanding and resolving issues internally instead of seeking resolutions in court at the first sign of an issue. By following these tips you'll be able to create a mutually beneficial relationship.
If this seems like a lot of work, an alternative is to hire a competent property management company to maintain your rental property and deal with tenants. If this interests you contact us today to find out how we can help you grow your real estate business.
- Setting the Right Rent Price for your Rental Property
- Tips To Be a Successful Landlord