We could just use the approach that charging really high rent will maximize profits. Of course, that only works if we have a half dozen tenants for every available unit. That doesn’t happen often; in fact rarely. Tenants have this annoying habit of moving on when they think they’re paying too much in rent. Sometimes they also drag their feet on meeting payment deadlines when the rent is a burden. Those pesky ‘vacancy and credit loss’ calculations are where we see the impact.
The quest for the highest ROI involves a lot of market research and some commons sense marketing strategy.
• Market research – Doing what your tenants are doing is the best way to determine what the market will bear for rents. Researching rental ads and calling like a prospect is a good start. Are there a lot of promotions out there like free months and others? If so, it’s probably a competitive market with high supply and softening demand.
• Call a property manager – Get some current market competitive information by reaching out to a property manager. They’re dealing with landlords and tenants every day.
• Apples to apples – Check the features and locations of the competition. If your rental unit has better features, the rent number can rise. If it is closer to downtown, entertainment, or employment, this can command more in rent.
• How long for tenants and rents – This is taking a look at your long term tenants and the last time you increased their rent. It’s nice to keep vacancies low, but only if you’re not sacrificing more in rent than turnover costs.
• Keep up with trends – Pay attention to changes in your market and trends so that you can anticipate rent adjustments before the vacancy.
Return on investment for rental property comes from a balance of competitive market factors and cost control. Work on costs, but pay particular attention to the market and set your rents for maximum return.
We could just use the approach that charging really high rent will maximize profits. Of course, that only works if we have a half dozen tenants for every available unit. That doesn’t happen often; in fact rarely. Tenants have this annoying habit of moving on when they think they’re paying too much in rent. Sometimes they also drag their feet on meeting payment deadlines when the rent is a burden. Those pesky ‘vacancy and credit loss’ calculations are where we see the impact.
The quest for the highest ROI involves a lot of market research and some commons sense marketing strategy.
• Market research – Doing what your tenants are doing is the best way to determine what the market will bear for rents. Researching rental ads and calling like a prospect is a good start. Are there a lot of promotions out there like free months and others? If so, it’s probably a competitive market with high supply and softening demand.
• Call a property manager – Get some current market competitive information by reaching out to a property manager. They’re dealing with landlords and tenants every day.
• Apples to apples – Check the features and locations of the competition. If your rental unit has better features, the rent number can rise. If it is closer to downtown, entertainment, or employment, this can command more in rent.
• How long for tenants and rents – This is taking a look at your long term tenants and the last time you increased their rent. It’s nice to keep vacancies low, but only if you’re not sacrificing more in rent than turnover costs.
• Keep up with trends – Pay attention to changes in your market and trends so that you can anticipate rent adjustments before the vacancy.
Return on investment for rental property comes from a balance of competitive market factors and cost control. Work on costs, but pay particular attention to the market and set your rents for maximum return.