One of the biggest mistakes new landlords make is underestimating the rental potential of their property. Often new landlords are so eager to get tenants in their property, that they undervalue their rental in the listing.
Rule of Thumb
When you compare actual rents, you need to consider the building, the number of bedrooms, and a similar location. As most landlords know, even 1/2 a mile can make a big difference in the type of rental housing available, and the rental amounts they can charge tenants.
A Better Way to Boost Rental Income
Most property owners buy a rental property intending to produce positive cash flow by earning more income each month than they spend on expenses. Unless you’ve done your homework, many landlords start with what the previous owner was charging as a base. Often there is a reason that owner decided to sell, and it more than likely had to do with a lack of cash-flow.
Of course, doing a rent estimate can be time-consuming unless you have the right rent estimator tool. The right tool is vital to ensure you are fair without shortchanging yourself.
Why Do Landlords Short Change Themselves?
New landlords are eager. They want to get the property rented, and they want to do it quickly. Of course, getting qualified tenants in your rental should be a priority, but not at the cost of shortchanging yourself.
If your rental is needs updating or is lacking amenities compared to other homes in the neighborhood, you may not be able to charge the same rent amount without doing some upgrades or renovations.
Keep Other Expenses in Mind
One issue new landlords have is miscalculating the expenses. Again in most selling reports, the agents give buyers the information provided by the sellers, but and buyers can assume the utility, tax, maintenance, management, vacancy, and repair estimates are correct but should always verify with the county, utility companies, and anyone else involved in daily management. Try to work with actual numbers as often as possible to avoid a loss in cash-flow.
A $20 Savings
Once you have determined what the average neighborhood rent is, and what you need to cover all of your monthly expenses, you can adjust your rental price by as low as $20 to attract tenants. Offering a small discount is the way to get the right tenants in your rental.
Before you rent, be sure you check the average neighborhood rent.