There are a couple things to take into consideration when you are pricing a rental property. This post is going to touch on these details to help ensure you are not over pricing or under pricing your rental property. The rental market is much like the sales market in regards to fluctuations. Don’t assume you can just automatically raise the rents every year and don’t assume your property will have higher rents in the future than they do today. I have worked with many properties where quite the opposite is true. Units that were renting for 700+ per month have dropped into the 500’s. Homes over 1000 per month got hit hard in our last rental recession.
There are some online rental analysis websites but unfortunately these are typically not an accurate representation. You will need to get more in depth to really find out what your property is worth. It’s important to price a property appropriately in order to obtain the best tenants with the least days on market. Over pricing a property and you will have much longer vacancy times, under pricing a property could affect your bottom line.
Make sure you don’t just look at “active” rental properties. By this I mean the properties that are currently being advertised but have not rented. Although it’s important to know your competition you will need to understand that folks can ask any amount for their rent they want. The active rental prices are not necessarily what the property actually rented for. You want to find currently rented properties and that will be your best gauge. Unfortunately there is not a method for an average home owner to obtain this information easily. I suggest calling a property management company in Colorado Springs to get some information about their inventory. I also suggest hiring a property manager but that’s for a different article!
Once you have gotten information about a few similar homes and what they have rented for you will need to see if it’s inline or not with the active rentals. Since markets can change surprisingly quick this is an important step! Just because a property rented for 1000 3 months ago doesn’t mean it will again today. If there are more homes in the area currently listed at 900 than at 1000, it makes no sense to advertise for 1000. Don’t get caught up on the rent price! I hear frequently that an owner needs to get at least X amount of dollars for rent to break even. Unfortunately home owners and property managers do not dictate the rental prices, the rental market does.
It will cost you far less to have a quality tenant in the property paying a large portion of the mortgage and maintaining your property than it will to leave it vacant! Price aggressively, screen tenants thoroughly, hire a Colorado Springs property manager and enjoy a smooth landlording experience!