The rent price for your residential property is critical to maximizing rental profits and minimizing rental risks. If you charge too low, you forego the profit potential and easily attract low-quality tenants.
If you charge too high, you fend off ideal tenants and risk long-term property vacancy. You should therefore aim to strike a balance with the ‘right rent’ so you can get the most out of your residential property. But how do you decide the ‘right rent’ for your residential property?
Size up the competition
Find out the rent price other property owners in the area charge for properties having similar features. Their rent averages are a good baseline for setting the right rent for your property. However, while the rigor of deciding that rent can prove too demanding, you can relieve yourself of the hard work by hiring Affordable property management service in California to rent out your property for the best rental value.
Indeed, it can assume full responsibility, relieving you from day-to-day chores while generating income. Thanks to their experience in the local area, property management usually has an idea of the right rent.
Consider the prevailing demand
Demand for rental services is dynamic. You must constantly stay on the lookout and adjust the property rent according to the demand trend. On some occasions, demand will favor you to increase the prices without any repercussions. Other times, it will require you to lower the rent or risk extended property vacancy.
For example, during economic downturns, the inability of people to buy means that they are more inclined to rent, thereby increasing demand for rent. Generally, you can charge more rent during seasons of high demand and lower the rent to attract tenants during seasons of low demand.
Amenities and utilities
What value do prospective tenants believe they will receive from your residential property? That will determine their willingness to pay particular rent amounts. A sure way to increase the rent you charge tenants and have them pay willingly is to increase the value that your property delivers.
For example, a tenant will willingly pay more rent for a housing property with a balcony than for one without. A tenant will also pay high rent for a residential property with utilities and amenities such as a parking space and running water. Without these, you should, by comparison, charge lower rent.
The right rent is attractive
If you advertise your residential property, the number of calls is a good indicator of whether to raise or lower the rent price. If you get fewer inquiry calls, chances are the rent is high. Unless backed by a favorable location and amenities that add value, you might need to lower the rent.
Conversely, should you receive an unusually high number of calls, the chances are high that your property is priced very low. In such an event, you should explore ways to adjust the property rent a bit higher. Otherwise, potential tenants easily assume that your property has a problem.
A critical factor you need to consider in deciding the right rent for your residential property is the monthly costs you will have to remit. This includes the costs, for example of mortgage, costs for maintenance, insurance, ground rent, and property taxes, among others.
It can also include expenses that you do not plan prior, such as emergency repairs, including plumbing works. Ideally, you should earn more from the rent of your property than you will need to spend to maintain or run it. Nonetheless, you will have to frequently adjust and balance between your expenditure and profits.