It seems simple from the outset: higher rents mean higher returns, right? Wrong – in our experience asking higher than market rents increases rental lead times which directly lowers returns. In fact, every 4 days a property remains vacant there is s a 1% loss in annual rental income. While expenses can be written off, lost rent cannot. It’s crucial to price rental property’s correctly to initiate a steady revenue stream. This is why all of our plans include a free market rental analysis with comparable correlation and a confidence score so you set your rent rate based on hard actionable data.
Occasionally, property owners may consider listing their rental rates higher than our recommendation. Our approach to setting lease rates is data-driven, leveraging our access to the Multiple Listing Service (MLS), which encompasses both sales and lease listings. The MLS is the primary platform for leasing properties and offers a comprehensive database of active and leased properties.
By thoroughly understanding your property, our property managers conduct a detailed comparative analysis using hard data. We evaluate comparable properties in your area, considering factors like size, age, condition, and amenities. Additionally, we assess current market conditions, including Days on Market (DOM) for listings in the vicinity. This comprehensive approach, combined with our extensive experience, guides us in setting competitive lease rates.
We recognize the urgency to avoid vacancies and maximize returns for property owners. Our lease rates are strategically positioned in the “sweet spot,” balancing competitiveness with profitability. Our experience has consistently demonstrated that overpricing a property leads to prolonged vacancies. It’s more effective to slightly underprice a property to attract tenants quickly. Here’s a scenario illustrating the downside of overpricing:
Example #1:
- Rental Rate: $3,000/month
- Time Vacant: 2 months
- Annual Income: $30,000
- Expenses: $660 (water, electric, landscaping)
- Annual Net Income before Mortgage, Taxes etc.: $29,340
Example #2:
- Rental Rate: $2,800/month
- Time Vacant: 1 month
- Annual Income: $30,800
- Expenses: $320 (water, electric, landscaping)
- Annual Net Income before Mortgage, Taxes etc.: $30,480
Reducing the rental rate by $200/month increases the annual net cash flow by $1,140. This really impacts your bottom line when start scaling to 10, 20, 30 doors and beyond (e.g., at 30 doors it yields an extra $34,200 per year!). Our leasing experience demonstrates:
- tenants prioritize affordability
- tenants and leasing agents overlook overpriced properties
- extended vacancies lead to stale listings
- potential property damage is higher with extended vacancies
- tenants research lease rates online
- vacancies result in mortgage payments and expenses without rental income.
Our market lease rate analysis considers current market rates, property condition, market demand, and historical leasing data to optimize lease rates for property owners. Our goal is to secure the best tenants at competitive rents, ensuring a successful and profitable rental experience for property owners. Remember, attracting top-tier tenants requires pricing properties appropriately and competitively.