You’ve invested in a rental property, and you’re looking for a worthwhile ROI. You want a rental price that will attract potential tenants, but also ensure you’re getting a fair rate and return on your investement. So, how do you find that sweet spot?
Start with Comparative Market Analysis (CMA)
In other words, how much rent are other landlords charging for similar properties? There are many angles to compare. Find at least two or three rental homes that are close to yours in the following points and the price of rent they bring.
- Total Square Feet: It's more than beds and baths. How spacious are the rooms, and how many rooms total?
- Age and quality of construction: When was the home built? If it's an older home, are the windows updated or at least weather tight? (This will affect heating/air bills). Are the roof and foundation solid? Has the furnace and air been well-maintained?
- Bedrooms and baths: Yes, as stated above, the size of rooms makes a difference, but the number of bedrooms and bathrooms is still a critical factor. Besides, does the master bedroom have a private bath? Is there an additional bath for every two additional bedrooms? Is there an easily accessed half bath for guests?
- Kitchen: The kitchen plays a crucial role in the rental price as well. Is it updated? Does it include an island, pantry, updated appliances, enough work area, and cupboards? Is it eat-in, or is there a dining room? If there is a dining room, does the kitchen have a breakfast nook or a couple of bar stools?
- Home Layout: Let's face it. Some homes are laid out much more conveniently than others.
- Attention-Grabbing Amenities: These are the extras that make a difference in home value and, therefore, the price of rent. Attached garage or carport vs., street parking, the size of the backyard and attractiveness of landscaping, patios, decks and balconies, an abundance of closets and storage, hardwood floors, and the view are prime examples.
- Location: Location, crime rate, quality of schools, convenience to shopping, access to gyms, pools, and other activities, and the neighborhood culture make a significant difference in home value and demand as a rental.
Where do you find homes to compare?
There are a variety of options available. Some take more time than others, but a thorough investigation will help you establish a fair market value for your property.
- Realtors: You likely used the assistance of a Realtor when you purchased your rental property. Ask them to give you an estimate on the price of rent. Request a list of a few rental homes in the area that the realtor considers comparable. Yes, you may have to pay for their services, but setting the right rate – one that attracts renters and brings you a satisfactory ROI – will quickly prove the cost well worth it.
- Online Ad Sites: Multiple sites list homes for rent. Check out the property descriptions and locations, as well as the cost of the lease. Track which homes remain on the list for weeks before being rented, and which ones are quickly snapped up.
Bottom line: Completing an accurate CMA and setting a fair market price on your rent will keep your rental occupied and bring you the return on your investment that you are seeking.
If this feels overwhelming or your time is limited, consider a property management company. They know the market, they have done the market analysis, and they will earn you the most bang for your buck. Rentals America provides full-service property management for residential properties throughout Phoenix, Arizona and surrounding areas including Mesa, Gilbert, Chandler, Glendale, Peoria and Surprise. We handle the day to day hassles so you can rest easy. Contact us today.