Today we are talking about four pitfalls to avoid when setting the rental prices for your investment properties. Setting a rental price is one of the most important decisions you’re going to make in the ownership of your property. It’s going to determine the quality of your tenants and it’s going to determine how long it takes to rent your property. Ultimately, it will determine the type of return you get on your investment with the rental property. Let’s talk about those pitfalls:
Setting the Rental Rate Based on Your Mortgage
Everyone has different mortgage payments and payment amounts. You cannot just establish a rental price based on what you owe every month on the mortgage. The price you come up with needs to be grounded in actual market data.
Listening to Your Neighbors
Another pitfall is basing your rental price on what your neighbors think you should rent your house for. Your neighbors have the best of intentions but they aren’t armed with the best information, so I wouldn’t assume my neighbors know better than the market.
Ignoring the Market
The real estate market is full of buyers and sellers and the rental market is too. They will come together at the most logical price point and that price point will depend on what other properties are renting for. You want to really pay close attention to what’s going on and make sure you are not ignoring the market.
Becoming Emotionally Attached to the Price
The first price you set isn’t necessarily the price you’ll end up getting for your rental property. There are a lot of things that contribute to the market price. You have to look at what is happening in the market as well as the time of year because seasonality does have influence. Pay attention to the strength of the local job market and housing trends; your rental price will reflect whether it’s a better time to buy or rent. Adjust yourself as you go through the process until you get the person who is willing to pay the rent that reflects the value of your property.
As you move forward, these are the four pitfalls to seriously consider when you’re establishing the rental rate. If you have any questions about what we’ve discussed, or you’d like more information, please contact us at Sweyer Property Management, and we’d be happy to help.