When it comes to property management, Hamden, CT, investors know that setting the rent at the right rate is crucial. This doesn’t mean just picking a number at the high end of what the market will bear for comparable properties. It means setting the rate at the point that will balance your ability to earn a good return against your ability to place and keep good tenants. After all, expensive vacancy days from tenant turnover could cost you more than you may earn from a higher rental rate.
How to Set the Right Rental Rate in Property Management, Hamden, CT
Here are 10 tips from Real Property Management Southern Connecticut on how to get the right number.
- Underpricing. This might seem obvious, but it can create a chain of problems that make it difficult to correct. The first is that it will be difficult to raise the rent in a way to make it more consistent with the market, especially in a market that is growing rapidly. Second, a tenant may not be inclined to vacate an underpriced property, prolonging your inability to correct the error. This mistake can cause your rental to underperform for years.
- Overpricing. While you might think that a higher rent will bring in more income, you’re only considering one half of the landlord-tenant relationship. Qualified tenants will select a more reasonably priced home over a comparable one that is more expensive. Also, good tenants will be more likely to leave at the end of their lease if they think they can do better. Longer vacancies, and more frequent vacancies, all cost money in both lost rent and in having to get the house rent-ready more often. This will erode any prior gains.
- Location. They say this is everything in real estate, and there is truth to it. A good school district will always draw families. Access to public transportation or commuter routes will draw commuters. Both of these types of properties will be in demand and can support a higher rent than comparable properties in more remote or less desirable areas. Make certain to feature these qualities in your marketing.
- Size. In suburban areas, homes with three bedrooms, two bathrooms, a yard, and a garage will bring the most rent. Look at the area where your property is, look at the nearby rental listings, and get a sense of how your property compares to what is most popular. If you have similar features in your property, let potential tenants know. If not, compensate with quality–updated appliances or other upgrades can offset size, depending on the type of tenant.
- Season. Arbitrary as it may seem, the time of year will impact what you can get for your rental home. Turnover in single-family homes and in university towns revolves around the school-year, with most move-ins and move-outs happening in the early summer months. This is when rents can be set at their highest. Smaller fluctuations may be seen around semester breaks. However, once August has passed, rents will likely drop. If you can, have your property rent-ready in early summer.
- Condition. Ask any of the rental property management companies, Hamden tenants will start making up their minds the moment they pull up to your rental home. If it lacks curb appeal, you’re already fighting a losing battle. And if the interior is dated or run down, you may have lost the war. Potential tenants need to be able to see themselves in the home and like what they see. You may not need to undertake a full remodel–a fresh coat of paint, new flooring, modernized lighting, and a clean and tidy yard can make a big difference. But if you want to get a higher rent, some updates and improvements should be done.
- Pets. It might surprise you, but not allowing pets is a deal-breaker for a large (and growing) portion of the tenant pool. Allowing pets gives you access to these tenants, who are willing to pay a premium for their pets. Not only will this allow you to charge more, you’ll likely rent faster. While you may be concerned about the impact of a pet on your property, the fact is that good, qualified tenants will take better care of the property with or without pets. And you can require a separate pet deposit to offset any cleaning or maintenance.
- Competition. You need to understand the market your property is competing in. Is it a low-inventory, high demand market? You may be able to charge more. If it’s the opposite, then, of course, you may have to lower your rent. Do the research to see how your property compares in terms of location, size, features, and condition. Talk to people who know the market such as local real estate agents, other property investors, and professional property management. Hamden, CT, is its own market, so don’t worry about what someone is getting in another city. Also, don’t put too much stock in what others are asking. Watch which homes rent quickly and which stay on the market longer.
- Finances. Rental property investing is a long-term endeavor. The expenses fluctuate month to month as issues arise. You may lose a month or more between tenants. There will likely be a disparity between what you want to earn and what you actually will earn. You have to set your price based on the market and not what you think you need to get out of the property. Otherwise, you’ll have a longer vacancy and may have to settle for a tenant who is willing to pay more because they are less-qualified (meaning more risk for you).
- Let RPM Southern Connecticut manage it for you. As you can see, there is a information to gather and consider to get the right rental rate. It’s a tricky question that requires expertise and extensive knowledge of the local rental markets. At RPM Southern Connecticut, we offer reliable, fact-based processes that will set a reliable rent rate range appropriate for your property type and location. This is a good idea because we’re not quite done.
Once You’ve Set Rent and Put Your Property on the Market, There are 2 Additional Steps
- Watch the Leasing Activity. Are you getting consistent inquiries from potential tenants? Are they asking to see the property? If so, you’re probably in the right rental rate range. If not, you’re probably priced too high. Track your numbers and see how many people are contacting you about the property, how many of them see the home, and whether any of them fill out an application afterward. That will tell you pretty clearly whether you’ve set it right or not.
- Adjust the Rent. If you aren’t getting applications, it may be because the rent is too high. Consider an adjustment. This can make a real difference in how quickly you lease the home and to whom. Think of it this way, would you rather lose $50 a month or another full month of rent?
Once you have a tenant placed, you may have questions about raising the rent for existing tenants.
- In property management, Hamden, CT, tenants generally assume their rent will rise after the first lease period ends. If the market supports higher rents for comparable properties, if your property management expenses have risen, or if you’re upgrading the property (with new landscaping, updating appliances, etc.), a reasonable increase in rent is appropriate.
- However, be careful not to push good tenants out of your rental home. Too big of an increase can spark turnover, which will increase your costs considerably as you get the house rent-ready, market it, and go through the leasing process again, all while it sits empty. Carefully weigh all of the costs and keep in communication with your tenants.
When it comes to rental property management companies, Hamden investors trust RPM Southern Connecticut. We can handle this for you and will likely save you money in the long term. Give us a call today and find out what we can do for you.