Are you confidently setting a competitive rental rate for your property in Colorado Springs? If you’ve been doing this for a while, you know that your rental value will depend on the market and how it’s performing. Your price will also depend on the competition; if there are a lot of homes just like yours in need of renters, you’ll have to be more competitive.
Additional factors that impact pricing include:
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- Property location
- Property condition
- Size and floorplan
- Season
Competitive rental rates will attract the best tenants to your property and keep your vacancy rate low. This leads to more income and higher returns for you in the long run. Also, good tenants are invaluable. They will pay rent on time, take care of your home, and likely renew their lease agreement at the end of the contract term. You can earn a lot more on a good tenant than you can on a high rental price.
It’s essential to keep vacancy rates low when you’re trying to maximize return on investment (ROI). You don’t want to lose an entire month of occupancy just because you refused to come down $100 on your price.
As Colorado Springs property managers, we have a lot of experience setting competitive rental prices that are still profitable for their owners. We’re taking a look at some tips we have for setting the right rental value for your property.
Rental Prices Follow Colorado Springs Rental Market Conditions
Pricing your home correctly and competitively requires you to study the market and to know how your property fits into it. Perhaps you want to earn $2,200 a month in rent because that will cover your mortgage and your expenses and provide a little maintenance savings and some monthly income. But, if homes similar to yours are renting for $1,900 per month, your price tag will leave you with an expensive vacancy or an undesirable tenant.
It’s vital to understand your local market. Pay attention to market conditions and what the rental landscape looks like. We have enjoyed a pretty fast-moving rental market lately. Prices are high and tenants are easy to find. As prices peak and things cool, remaining competitive is more important than ever. Knowing how to get a sense of the market will help you with the pricing process.
There are plenty of resources online that can help you understand the local market better. Talk to a local Pueblo property management company or a Colorado Springs property manager. We collect meaningful data and insights that can help you with better pricing.
Rental Value Depends on Location, Size, Condition, and Season
While you cannot control the condition of the current rental market, you can control how you position your rental property within the market. Your rental value depends on a number of things, and you need to understand this when pricing your property competitively:
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- Location. The property’s location will always influence how much you can and should ask for in rent. If your home is in a desirable school district, for example, you’ll be able to price it a little higher than if you’re in a neighborhood with no schools or struggling schools. Use your location in your marketing and advertising, especially if your price is a little higher than similar properties in less appealing neighborhoods.
- Size. The size and floorplan of your property will also play a role in how competitive you want to be with pricing. Three-bedroom, two-bath homes with a garage and a yard do very well in suburban neighborhoods. Downtown apartment units with a view and parking don’t have to be as big, but they do need modern appliances and updated amenities.
- Property condition. This is one of the things that you have absolute control over. It also has a big impact on what you can charge. Make sure your home is in good condition. If you want to attract top dollar, make some improvements and updates. You don’t have to do a complete remodel. Changing out the hardware on drawers and cupboards can make a big difference. Improving the lighting or the landscaping can also provide major returns for minor costs. Make sure your home is clean, functional, and attractive.
- Season. This is Colorado, so there’s an absolute necessity that your property is more competitively priced when you list it on the rental market during the winter. No one wants to move in the bitter cold, the snow, or the ice. No one wants to move around the holidays. Tenants with children will not want to move during the school year. Be mindful of your season when you’re pricing your Colorado Springs rental property.
Conduct a Market Analysis for Competitive Pricing
Before you establish your own rental price, get an idea of where your competition stands.
A professional Colorado Springs or Pueblo property management company can easily conduct a comparable market analysis that will track what similar homes are renting for in your area. This is extremely beneficial because it will give you a range that’s acceptable for your property.
Reliable data is essential. We’re doing a lot with property management insights and analytics, and we can drill down into surprising detail when we’re looking at what homes are renting for in and around Colorado Springs.
Knowing where your property stands compared to all the others on the market will help you establish a more competitive rental price, which will attract better tenants and eliminate a long vacancy risk.
Remaining Competitive and Flexible with Pricing
There will be certain indicators that tell you a more competitive price is necessary.
When your rental home is listed on the market and you’re getting regular phone calls and inquiries, and prospective tenants are asking to see the property, you’re probably in a comfortable rental range. But, if no one is calling and no one is applying after seeing the home, you might be pricing it too high.
Find a way to track your results. Gather information on the number of people who are contacting you, how many of those prospects are seeing the home, and whether they’re filling out an application after the showing. This will tell you whether you’re in the right range.
Price is potentially a problem if you find that no one is applying for your home. You’ll want to remain flexible and be willing to make your rental rate more competitive. We strongly recommend that you remain flexible and don’t get too emotionally attached to the amount that you charge. Losing an entire month or two of rent is more expensive to you than lowering your price by $50 per month.
Competitive Rental Prices Attract High-Quality Tenants
A competitive price doesn’t only reduce your vacancy; it also impacts the type of tenants you attract and place.
Well-qualified tenants know they have a good chance of being approved for any available property they want to rent. They aren’t going to waste their time with properties that are overpriced. The tenants who are willing to pay more are those who have been denied by other landlords. They may have bad credit, unacceptable income levels, or negative landlord references. Accepting a tenant like that is a big risk, even if they are willing to pay a monthly rent that’s higher than the market will support.
When you’re pricing your rental property, you want to think about renting it out at a competitive price so that you’re quickly able to put it in the hands of a good tenant. That’s the best way to protect your property and your ROI. Think about the long-term effects of your price, and not just the immediate income you’ll receive every month. You won’t earn any income at all if you have to evict a tenant or wait for someone who is willing to pay your price.
Rental Increases Must be Smart and Strategic
You also have to be competitive when you’re raising your rent at lease renewal time. Most tenants expect that their rent will increase at some point when their initial lease ends, and there are some very good reasons to raise the rent before you sign another lease:
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- The market supports higher rent for properties like yours;
- Your property-related expenses have gone up; and,
- You’re offering additional services, such as landscaping or internet.
Tenant retention is critical, and you don’t want to chase away good tenants with extreme price increases. When you’re ready to renew a lease and you want to increase the rent, make sure you can justify your reasons to the tenant, and make sure it’s not an outrageous increase.
Good tenants who love your property will not want to leave it. But, they will check around and see what other properties are renting for before they sign a renewal. Make your rental increase reasonable, and let the tenants know that the increase is consistent with the market.
Consider adding value when you raise the rent. Perhaps a free carpet cleaning will make your tenants happy, or you could offer to replace an aging appliance. Always give your tenants plenty of notice before you raise the rent, and keep the lines of communication open so you aren’t surprised if they decide to leave.
Pricing your rental property competitively is an important part of your success as a landlord or investor. If you need help with Colorado Springs or Pueblo property management, we’re your best resource. Contact our team at Muldoon Associates.
