One of the most important steps in leasing your rental property in San Diego or Riverside counties is setting the right price. This can be a lot more difficult than it might seem due to the consequences of setting the rent either too high or too low.
The reasons you might set rent too high or too low
At it's most basic, setting your rent too high will make it difficult to attract residents, whereas setting it too low could end up costing you money (and thereby hurting your investment return). However, you may still set the price of rent too high or too low due to the following reasons:
- You're trying to cover your own expenses - Obviously, you don't want to take a loss. However, if you've spent too much buying the property, you can't just try to make up for it by raising the rent. Prospective residents are smarter than that. You can add incidental charges instead, such as fees for pets, parking and roommates, to help cover your expenses.
- You think charging less will attract more prospective residents - Yes, you might fill a vacant property quicker, but not only will you lose money - even if it is just a little bit - you may also hurt the overall value of your rental property. This is because a rental property's value may be determined by the income it brings in.
- You think a lower rent will require less work on your part - Don't assume your residents will take care of small maintenance and repair tasks on their own just because they are paying less rent. You'll be doing just as much work to maintain the property as you would if you had set the rent correctly. Remember, residents aren't going to think in terms of saving money because of lower rent. Their rent is their rent, whether you priced it low or not.
Determining the proper rent for your property
So now you know that there's no reason to charge more or less than what your rental property is worth. But how exactly do you figure out the proper rent to charge? The following tips should help you determine the right amount to charge in rent:
- Look at neighborhood rent prices - Do your research on other rental properties in the neighborhood to get an idea of how much rent is being charged in the area. You can simply drive around and look for "for rent" signs, or you can look online for advertisements in the area, such as on Craigslist or Realtor.com. Just keep in mind that this is a ballpark figure - there are a lot of other factors to consider. For one, a property with five bedrooms isn't going to be a good comparison if you're looking to rent out a two-bedroom home. Secondly, some of these properties may have been vacant for a long time - there's no way to tell by with just a glance if the rental property is overpriced or underpriced.
- Use rent comparison tools - There are plenty of rent comparison tools available online to help with your research. For example, RentBits allows you to track average rent rates over the last 14 months, while Zillow can give you rent estimate data based on any address that you enter.
- Use a rent determining tool - One effective online tool for determining rent is RentRange. By inputting a specific address, zip code and city, you can have access to historical rent rate trends, property vacancy rates, comparable rental property information, rental market strength indicators and even data on rental cost per square foot. Because of how much information this tool provides, you will have to pay to use it.
- Speak with a property management expert - A property management company has a pulse on the real estate market. This means that they can inform you about other similar properties that are up for lease and how much they are charging. Of course, these properties may be under or over charging as well, which is why a property management company can also pull up similar properties in the area that were recently rented out. Additionally, they can tell you what improvements to make to your property to increase your rent and be more competitive in your market.
Use these tips in order to determine the rental rate for your property that isn't too low or too high. However, keep in mind that there are certain things you can do to your property to help boost its value, allowing you to increase your rent. This includes investing in smaller renovations or remodeling projects. You should be sure to speak to an expert, such as a property management company, about what kind of updates could make to your property to improve its value and whether they are worth investing in.