The ideal rental rate isn't a myth! Every investment property has a monthly rental price that is not too low, not too high, but just right.
Renters are smart: whether you rent to millennials, Baby Boomers, or everyone in between, your residents know when they're paying too much for a rental home.
- If the rent is too high, you'll lose renters and find it challenging to find new residents.
- If you drop the rent too low, you'll lose money on your property every month.
- What can you do if the rental price isn't right for your investment properties?
Adjust it—but make sure you do it right. Follow these tips from West Seattle property management to lower (or raise) the rent for your investment properties.
When You Need to Lower the Rent
An overpriced rental property isn't going to generate the income you need to build your long-term wealth. When it's time to set the monthly rental rate for your properties, "choosing" an amount that you want to charge your residents is the wrong strategy.
The rental price for each property isn't a choice. We could say that if you listen close enough, your property will tell you how high the rent should be—but there's more to it than that.
What Happens When It's Too High
When the monthly rental rate is too high, your property sits empty. The longer your property remains vacant, the more money you lose.
- If you're putting a property on the rental market for the first time, a high monthly rental rate will turn potential renters away.
- If you raise the rent too much on a current resident, they'll find a new place to live when it's time to renew their lease.
In either instance, without a monthly rent check, your property becomes a money-draining liability rather than an income-generating asset! Some amount of rent coming in each month is better than not receiving any rent money at all.
However, before you drop the monthly rental amount too low and overcompensate for an overpriced rental, make sure you understand what happens when the rent is too low.
When You Need to Raise the Rent
Getting more money from your rental property probably sounds better than lowering the rent, right? In some cases, it makes sense to raise the rent—but not too much, and not too fast. If property taxes go up or other expenses increase, you have good reason to raise the rent for your investment properties.
What Happens When the Rent Is Too Low
As an expert in West Seattle property management, we want to caution you: when the rent is too low, you aren't making enough money on your investment properties. Underpriced properties make it challenging to pay your property's expenses and have enough cash flow to run your investment property business. If an emergency repair comes up, you won't have enough cash on hand to hire a contractor for a quality repair.
Underpricing your property to get a renter can be a bad idea. Remember, renters are smart: you might get more rental applications than you can handle when the rent is too low. However, you might also attract potential residents who don't match your income criteria if the monthly rent is significantly lower than comparable properties in the area. If you need to raise the rent later, this might mean needing to look for a new resident sooner than you otherwise would have.
Raising the rent to a competitive monthly rate helps you target your ideal renters, generate the income you need from your property, and stay competitive.
How Investors Can Adjust the Rent the Right Way
Too much of a rental disturbance too quickly can upset your residents and leave you with an empty property. Before adjusting the rent, make sure you understand why you need the rate adjustment and how to go about it the right way. Here's what we suggest investigating as the leader in West Seattle property management.
1. Run a Rental Analysis
Rental prices are not one-size-fits-all. A rental analysis helps you find the ideal rental rate for each of your investment properties. This kind of analysis considers the rental market, similar houses with comparable amenities, the condition of the property, and several other factors to help you determine the ideal rental rate.
2. Raise the Rent Painlessly
If you realize your property's rent is significantly lower than it should be, resist the urge to increase the rental rate significantly right away. Small, incremental increases when it's time for a resident's lease renewal can make it a painless process.
3. Adjust the Rent Before Listing
When listing your property, it's an ideal time to adjust the monthly rate to match the results of the property's rental analysis. Starting at the right monthly rental price helps you find renters faster and avoid losing money on your property!
West Seattle Property Management Can Help!
Whether you need to raise or lower the rental rates for your investment properties in Seattle, your expert property manager can help! Real Property Associates can run a rental analysis to help find each property's perfect rental rate. If you have a property that's priced too low or too high, we can manage the process of informing your residents and adjusting the price painlessly!
There's no reason to keep your portfolio from being the most profitable that it can be. Let's work together to help you find the right rental rate with a Free Rental Analysis for your investment properties!