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December 20, 2019
Tagged in: Setting Rent Prices

Don't Underestimate Your Rentals Potential

Updated April 21st, 2020

One of the biggest mistakes new landlords make is underestimating the rental potential of their property. Often new landlords are so eager to get tenants in their property, that they undervalue their rental in the listing.

Rule of Thumb

By looking at online rental listing services, they can get a reasonable estimate of what other property owners in the area are charging. This is a broad rule of thumb. But, they are lacking essential data and are not comparing apples to apples. When you compare actual rents, you need to consider the building, the number of bedrooms, and a similar location. As most landlords know, even 1/2 a mile can make a big difference in the type of rental housing available, and the rental amounts they can charge tenants. 

A Better Way to Boost Rental Income 

Most property owners buy a rental property intending to produce positive cash flow by earning more income each month than they spend on expenses. Unless you’ve done your homework, many landlords start with what the previous owner was charging as a base. Often there is a reason that owner decided to sell, and it more than likely had to do with a lack of cash-flow. 

Using average neighborhood rent data is the better way to set your rental price than basing it on chance or what a previous owner charged. Of course, doing a rent estimate can be time-consuming unless you have the right rent estimator tool. The right tool is vital to ensure you are fair without shortchanging yourself.

Why Do Landlords Short Change Themselves?

New landlords are eager. They want to get the property rented, and they want to do it quickly. Of course, getting qualified tenants in your rental should be a priority, but not at the cost of shortchanging yourself.

There are plenty of people out there looking for a rental. Around 65% of households headed up by people under the age of 35 were renting. Offering a lower than average rental price may not be the best way to attract the highly qualified tenants that you want in your building.

A better way to do things to ensure that you are fair to all parties, including yourself, is to use a rent prediction tool to get a better idea of precisely what the value of your rental is. A rent estimator can make it easy to determine what a fair market price is for your rental property. 

With the proper tools, you can enter the actual property address, the type of rental, the number of bedrooms, a search radius, and a timeframe. This can give landlords accurate data for what’s going on in their area, with similar properties during the same timeframe. A win-win when setting rental prices. 

Landlords must verify that the comparable rentals against properties that are in a similar condition to your property. If your rental is needs updating or is lacking amenities compared to other homes in the neighborhood, you may not be able to charge the same rent amount without doing some upgrades or renovations.

Keep Other Expenses in Mind

One issue new landlords have is miscalculating the expenses. Again in most selling reports, the agents give buyers the information provided by the sellers. 

Trust is essential in this exchange, but and buyers can assume the utility, tax, maintenance, management, vacancy, and repair estimates are correct but should always verify with the county, utility companies, and anyone else involved in daily management. Try to work with actual numbers as often as possible to avoid a loss in cash-flow. 

A $20 Savings

Once you have determined what the average neighborhood rent is, and what you need to cover all of your monthly expenses, you can adjust your rental price by as low as $20 to attract tenants. Offering a small discount is the way to get the right tenants in your rental.

There is real value in knowing what the average neighborhood rent is beyond setting the price for your rental. You can use the information to determine what upgrades you want to make to your rental to make it the sought after rental in the area.

You can use the rent estimate and rent predictor as a guideline for budgeting and investing in future renovations for your rental. Any landlord can benefit from having easy access to the information that helps them to make crucial decisions.

Before you rent, be sure you check the average neighborhood rent. Don’t underestimate the value of your rental. Get the tool that can make property management more effortless.

Check out Rentometer before setting your rental prices to really hone in on what your property and neighborhood can support.