The Importance Of Competitive Rental Home Pricing
Competitive rental home pricing is one of the most important decisions you’ll have to make about your investment property. Some investors are emotionally tied to the property, or just want to make as much money as possible, and price their property far above their competitors. Others are looking to quickly fill vacancies and think under-pricing their property is the way to go. Both scenarios send red flags to renters and make renting out a property even harder.
The key to strategic rental pricing comes down to the current state of the rental market, your specific location, and the quality of the property. You can do a lot of this research on your own, but if you’re serious about getting the most for your rental property It’s recommended to work with a professional property management team that knows the area, knows the market, and knows the competition.
Here are a few things to consider when determining the best rental price for your property:
Median Income Of Target Renters Is A Consideration For Competitive Rental Home Pricing
When choosing a rental price, you have to think about your audience. A Temecula property management team can give you the facts and figures about the median income of target renters. Many renters look for properties that are at or below 30% of their monthly income. For example, the median household income for renters in Temecula is $103,546, and 30% of that is $31,063. Break that down by the month and the average renter in the area is looking to spend around $2,588 a month on rent. This is a good place to start when settling on a rental rate, but median income is only part of the puzzle. You also have to take into consideration the location, condition of the home, lease terms, and the current status of the market.
Location Is Key To Competitive Rental Home Pricing
It’s no secret that location is one of the most important factors when making any real estate decision. When choosing a rental price for your property it’s important to research not only the average rental rates in your state but also in your city and your particular neighborhood. People will pay more for rental properties that are close to good schools, popular shopping and business districts, and entertainment venues. Make a note of how close your property is to the major attractions and landmarks in your city and use that as a factor to determine your rental price.
Remember, you can do all of the upgrades in the world and set the rent high, but if it’s in a bad location, (near train tracks, in a high-crime area, in a struggling school district) people aren’t going to pay it. Location plays a major role in pricing your property competitively.
Size and Condition Of The Home
Another factor to consider when deciding on a rental price is the size and condition of the home. Research to see how your property compares to other rentals in the area. How does your property compare to others in the area when it comes to:
- Number of bedrooms
- Number of bathrooms
- Number of stories
- Square footage
- Added/upgraded features
- Pet policies
- Condition of the home
If your property is similar to the competition in most of these areas, your rental price should be very close to what they’re asking. If your home has more to offer, it’s safe to assume you can charge a little more.
The Dangers Of Over Pricing
Setting your rental price above and beyond the competition (without reasonable cause) can be risky for a few reasons. If you are charging a lot more for the same product, your target renters are going to make the most cost-effective decision and go for the lower-priced rental. This means your property stays vacant for longer, you’re paying expenses longer, and the home stays on the market for longer. When renters see that your property has been listed for 3,6,9 months without activity, it will send up red flags that there is something wrong with the property. Usually, you’ll end up reducing the price in the end anyway. Competitive pricing helps to avoid this costly and inconvenient pattern.
The Dangers of Under Pricing
Some investors think setting their rental price significantly lower than the competition will make their property stand out. And they’re right, the property will stand out but for all the wrong reasons. An underpriced property is also risky for a few reasons. It can significantly impact your ROI, and renters will see a low-priced property and immediately think there is something very wrong with the property. This leads to the property sitting on the market for a long time, not bringing money in and still costing you money in upkeep expenses.
Your Next Steps To Competitive Rental Home Pricing
It’s important to take the time to do the research, ask questions, and settle on a rental price that aligns with your property. The location, size, and condition of the home and the current state of the market all play a big role in choosing the right rental rate. Pricing your home right the first time results in quicker more profitable sales, less time on the market, and an increased ROI. Want help figuring out the best rental rate for your investment property? Connect with us today.