All rental property owners want to get the most positive cash flow possible for their rental home. Here are some things that must be considered.
Rental Property Management in Phoenix
Rental Price Considerations
Rental Price Considerations
Here are some things to consider when setting the rent for your rental home. First and foremost is “What The Market will Bear”. Any home will rent if it is priced right. If the home is not renting in a timely fashion, it is probably not priced correctly. Sometimes even after having done an extensive market analysis the property does not rent. Analyzing the market value of a rental home is not an exact science. If you are getting very few showings and no offers, the market is telling you something. Rental markets fluctuate and properties differ.
A recent communication with an owner regarding a rental property that was not renting went like this:
The property has been on the market for two months now and we have had very little interest and no offers to lease. I have recently leased 6 quality properties in under 21 days. Your property is very nice, but the market is seeing it as over priced, ……. if priced right it should have a tenant by now. Even if we were to find a tenant to move in tomorrow for $1,800.00 per month, your effective rental rate for the initial 12 month period would be $1,500.00 per month.
On the above communication the owner dropped the rental price to $1,600.00 per month and within three days we had an application. If you divide a one year lease by 12 months you get 8.33% each month. Each month the property is not rented deduct 8.33% from your annual rental income. If the property sits vacant for two months you have lost 16.66%. If it sits vacant for three months you have lost 24.99%. So, if an owner is trying to get $1,800.00 per month and loses 24.99% their effective rental rate (even if it rents immediately for $1,800) is now approximately $1350.00. Doesn’t it make more sense to price the property at $1,600.00 from the beginning and get it rented quickly?
Listen, renters have more access to information about rental properties than ever before and they will not pay over the market for a property. They know what it is worth. Only renters with poor credit and who are a high risk to you as an owner will pay over the market. Are you sure you want to go there?
McMath Realty, a Phoenix rental property management company is in the business of getting your property rented as quickly as possible. In order to do we encourage owners to take these thoughts into consideration when renting out their property.