Deciding on the best price for your rental property can seem daunting. You want to be sure the price will cover your own expenses while still being competitive. How do you go about determining a price? Working with a property management company like Quartermaster Properties gives you access to professional expertise and advice to help determine the best pricing. From market research and trends to timelines and longevity, this list of things to consider should get you going in the right direction.
Why Rental Property Pricing Matters
Is the pricing really that important? Can it make that much of a difference in the success of your rental property? The answer is yes. The more intentional you are with the pricing of your rental property, the better your long-term return on investment (ROI) will be. Pricing your rental property right helps with tenant retention and keeping your vacancy rate down.
Factors That Affect Rental Pricing
Each of these could play a role in the pricing of your rental property and should be considered when determining the price. While some things, like seasonal demand, might not be something you can control, you still want to take it into consideration. Like any new endeavor, you’ll need to do your research on the market and with current trends in the rental industry. All of these factors should impact your ultimate decision.
Market Research and Local Comparables (Comps)
Doing market research and making yourself aware of local comparables is a great start in determining your rental property price. When you’re aware of the rental market in your area, you’re able to make your price competitive with others in the area. Knowing the area helps you better understand the current demand and expectation potential tenants may have. You can utilize free tools like Zillow’s Rent Zestimate or SmartAsset’s calculator to analyze comparables. Partnering with a property management company like Quartermaster gives you access and their expertise on these different trends.
Property Features
As you’re doing your market research, you’ll also find that tenants have an expectation on property features, especially in certain areas. For some areas, easy and convenient parking is a must while other areas could lean more towards having the latest and greatest appliances. If you’re comparing your property to others in the area, you’ll want to make sure your property is up to date on the latest and greatest property features. It is wise to include the cost of those features and amenities in your rental price. You can provide a great experience for your tenants while still earning a profit allowing for other updates down the road.
Economic Trends
Your awareness of economic trends will be helpful when pricing your rental property. You’ll want to research your local area for inflation rates to compare with the cost of living. Pricing needs to be competitive but it also needs to be fair and attainable for the area you’re trying to find tenants. Taking a look at the local job market can also help determine pricing. Is your property in an area where a lot of people within the same occupation could need affordable housing options? Can you meet that need while still covering your own financial bases?
Seasonal Demand
- How demand fluctuates during different times of the year (e.g. higher demand in summer vs. slower winter season)
The seasonal demand of your property can vary depending on your location. Is your property in a college town? If so, you’ll want to make sure pricing is attainable by college students if that is the type of tenant you’re wanting to serve. If not, then it would be worth looking into comparables in the area to make sure you’re not outpricing the crowd you want to appeal to while still keeping yourself out of the running for those college aged people. Maybe you’re in an area with higher demand for summer rental properties. That would require not only specific amenities to fit within that, also flexibility in timelines. Typically, winter tends to be a slower rental season so you should be prepared for a higher chance of vacancies or be willing to adjust pricing.
Adjusting Rent Over Time
While setting your initial price is important, you also need to be prepared to adjust your rent price over time should trends change or updates needd to happen to your property. A property management company like Quartermaster can help you determine the rate it would need to increase to accommodate these things while still being attainable for tenants in your area.
Reassessing Market Trends
Regularly analyzing the market helps you make sure your pricing is competitive. If you notice the market for rental properties in your area is amping up, you may what to consider altering your price to keep up with demand. As you’re researching comparables in your area, you may notice property upgrades or amenity changes that could also trigger you to review your pricing. Assessments of these different variables to the market are important to keep in mind as you’re planning your pricing plan.
Managing Rent Increases
The inevitable part of owning a rental property is rent pricing increases. There will always be necessary upgrades and you will want to make sure you’re still profitable. While the increase is unavoidable, there are ways to go about it without alienating your tenants. Initially, you’ll want to effectively explain your reasoning for the increase with plenty of time prior to when the increase will happen. Giving your tenants time to prepare for this with good reason will help make the increase a little easier. Maintaining a good relationship with your tenants encourages trust. They’ll trust you to make the right decisions, while necessary, that go towards ultimately raising rent prices. You can also offer alternative ways to make the increase less of a burden on them. Maybe offer a percentage off for signing a longer lease. Ultimately, being upfront and honest about the anticipated changes will make the relationship easier and better for the long run.
Do Your Research to Set Your Price
A big decision in owning a rental property is determining the price. You want to be sure you’ve done your research and are prepared to validate the decisions you’ve made. Whether it is better understanding the comparables in your area or planning for necessary repairs and updates along the way, you’ll be thankful for the effort you put in on the front end of this process.
While there are many contributing factors to consider, you don’t have to feel alone in making the decision. Working with a property management company like Quartermaster Properties offers expertise with assisting landlords in optimixing their rent pricing. Reach out to Quartermaster Properties for a free consultation or to learn more about professional rental property management services.
