With your investment property, you want to price to rent because that rental rate is going to be very important to your vacancy time. Vacancy is the period where you’re not making any money. Every week that your property is vacant eats up 2 percent of your annual income on that property. So, a full month that’s vacant means you’re down 8 percent. That vacancy period may be due to not having the correct market rent established for your property.
How Much Should I Rent My House For? Do Compare Similar Properties
At Independence Capital, there are a few things we do to price your property correctly. We compare like homes to what we’re currently renting. We look and see what has recently rented and we give you a market rent. It’s hard to use some of the occupied homes that have had tenants for a couple of years. There has been a downturn in our economy in Farmington recently, and unfortunately a downturn in rents as well. So, we try to go by what is currently renting. We’ll look at the price per square foot so we can have a standard, and then we also consider the quality and condition of the home and where it’s located. Those other factors play into it.
Do Consider Market and Timing
We want to know what the market activity is before we price. In January and February, things are slow. So, it’s best to lower that price so you can get your home occupied. In busier months, you can consider raising the rents or looking for tenants at a higher rental rate.
Don’t Price Based on Mortgage and Fees
Some of the variables that should not be used to come up with market rent include the mortgage on the property. While we would all love to cover our mortgage and property management fees, that’s just not always possible. So, keep in mind that we cannot use your mortgage payment as a standard for the rental price. We want to keep it in the right market range. Tenants will know what the market will bear. They’re out there shopping for a home, so they know what to expect to pay.
Another variable not to use is the property management fee. Don’t add that onto what you ask for rent. It might lead to a longer vacancy. You need to find the right target for your rent so you keep the property occupied and the income flowing. In Farmington, we’re hoping to see an improved market in 2017. Then, we can start approaching higher rents and we can start considering those factors.
Don’t Take Pricing Advice from Your Sales Agent
The final factor to avoid when pricing your property is advice you might get from your sales or buying and selling Realtor. Sales agents will always have an opinion on what your property is going to rent for, but check with a property manager for a more accurate market rent. You wouldn’t want your property manager setting a sales price on your home. So, use a professional property manager to do good market research and come up with target rent to minimize your vacancy.