Setting the ideal monthly rent for your investment properties can feel like a guessing game. As much as you might want to set the monthly rent at a price you have in mind, your property and the rental market are the true drivers of how much you can (and should) charge for residents to live in your property.
How can property investors know the ideal rental rate for each set of apartments they have in their portfolio? Every property is different, which means every property in your portfolio needs a rental price that works for the specifics of that unit. To take the "guessing" out of the pricing game, we can help!
As an expert in apartment management (Seattle area), we have insight into how to determine the right rental prices for your properties! It's called a rental analysis, and we'll tell you everything you need to know about how it works and how it benefits a property investor's bottom line!
What Is a Rental Analysis?
A rental market analysis gives you a complete picture of how your investment properties (and your portfolio as a whole) fit into the current local rental market. Without this valuable information, you could overprice (or underprice) your multi-family and single-family units.
What Happens When the Price Is Wrong?
As one of the leading providers of apartment management Seattle has to offer, the simplest answer to this question is that you lose money! An overpriced property deters renters from living in your rental. When residents don't want to pay a high monthly rental rate, your property sits empty. An empty property costs you money every month that it stays vacant!
An underpriced property might help you find a renter faster, but you'll lose money every month. The monthly amount paid by your residents isn't "pure" profit in your pocket. That monthly rent payment has to cover:
- The monthly mortgage payment
- Property taxes
- HOA fees (if applicable)
- Maintenance (including enough cash flow for emergency repairs).
Only then is the remainder available profit in your pocket!
Without knowing that information and how your properties compare to other apartments in the neighborhood, you won't know if you're charging enough rent to cover expenses while also yielding a profit. If you're not making any money on your investment properties, you won't reach your long-term wealth goals!
What Goes Into a Rental Analysis?
Expert apartment management (Seattle and abroad) uses a rental analysis to help property investors determine the ideal monthly rental price. That price is a balance of covering each property's expenses, generating a profit, and staying competitive in the Seattle rental market.
When conducting a rental analysis, property investors need to analyze several key areas to see how your properties stack up.
What's the neighborhood like? Is it appealing to potential renters? Your next residents aren't looking "only" for a home; they want a community that fits their lifestyle. When analyzing a neighborhood, your property's rental price should reflect:
- The quality of nearby schools
- Access to public transportation, highways, and airports
- Availability of nearby parks and recreation
- The proximity of shopping, restaurants, and other entertainment.
If you're considering a new investment property to add to your portfolio, these are critical characteristics to consider. You'll also want to notice if there is a high vacancy rate for rental properties and closed or empty businesses. Too many vacant properties can be a sign to walk away from an available property.
How does your property compare to similar rental properties in the area? Your rental analysis should include a look at similar properties and how your property compares.
Find rentals with a similar amount of square footage, bedrooms, bathrooms, and amenities. If you charge a higher monthly rent than what comparable properties offer, you could lose quality renters to those properties.
Knowing the vacancy rate for similar properties in the area helps determine your monthly rental price. How long do nearby properties sit empty? If you see a "sweet spot" rental amount that helps reduce turnover times or resident turnover for similar properties, factor that into your decision when setting the monthly rental rate for your properties.
Property Value and Purchase Price
What's your monthly mortgage payment for your rental property? How does each property's value compare to other rentals in the market? To stay competitive with other properties and generate enough income, be sure also to consider the property's value and how it has changed over time.
Let the Experts Help With a Rental Analysis!
- Where can property investors get the information they need for rental analysis on a potential rental property?
- How can you interpret the information to determine the ideal monthly rental rate?
- Turn to the local apartment management Seattle has to offer!
Real Property Associates has years of property management experience in the Seattle rental market. We've been guiding investors on how to approach their portfolio since 1991.
We offer a Free Rental Analysis to learn about your property and help you see the potential income you could generate with the right property management in place. Whether you're considering adding a new property to your portfolio or you're not sure if the rental price is right for a current property, get in touch!