One of the most important—yet tricky—aspects of owning an investment property in Hampton Roads is deciding on a rental rate for your home.
- If you set the price too low, you lose profits.
- If it's set too high, renters shy away.
Determining the best rate for your rental home in Hampton Roads is an elaborate selection of trial-and-error, analyzing the market, and responding to feedback. The following outlines strategies to set an ideal rent rate to maximize profit with your rental home in Hampton Roads.
Calculate Your Profit Baseline
Before putting your rental house on the market, take time to establish some figures:
- How much money is needed to cover the mortgage (if you are still paying off the home)?
- How much should you be putting aside for savings in case of emergency maintenance or vacancy periods?
- How long can you withstand vacancy in your rental home without dipping into your savings?
As an expert property manager in Hampton Roads, we suggest a buffer of three to six months of savings for mortgage payments if your rental home is not paid off.
- After you've covered your back up funds, decide how much of a profit you want to make.
- Think about your ideal return on investment (ROI).
A property management company in Hampton Roads can help determine these factors for you and assist in setting and achieving the financial expectations you have in mind for your rental property. Keep your profit goal in mind as you set the rent rate for your home, but don't stay rigidly committed to it: it's best to have a number range for the profit you want to attain. Remember, some profit is better than none at all.
Conduct a Market Analysis for Your Rental Home
A market analysis is an ideal tool for finding the "bullseye number" for your rental home. Market analysis helps you canvas the specific location in Hampton Roads that your rental home is located in and determine what the competition is charging.
The report takes into account many factors and is something property management professionals are trained to provide. Ideally, you would also perform a market analysis of Hampton Roads if you are looking to buy another investment property before the purchase, so you can ensure you can set the highest rent possible.
Important Questions to Answer
A proper market analysis answers numerous questions about the rental area and provides a range of acceptable rent rates. It lays out:
- The number of rental homes in the neighborhood
- The types of properties there are: single-family, multi-family, or apartment complexes
- How many houses are rented, the average vacancy period, and days on the market
- What the average rent per square foot is in the area
- The "high end" and "low end" rent rate for the neighborhood.
Online rental marketing sites such as Zillow can help you determine what most homes in Hampton Roads rent for, but this does not give you a full market analysis for your rental home.
Some other questions a rental market analysis should answer:
- What is the average application fee for the area?
- How long do renters typically stay in the area?
- What is the mean household income in the area?
Consider these questions as well when conducting the research necessary to price your property competitively. Alternatively, Renters Warehouse Hampton Roads also offers our landlord-partners a free Rental Price Analysis to help you find your bullseye rent number!
Factors to Consider
In addition to the market analysis, there are factors related to the rental home and its neighborhood that should be considered when setting a rent rate. These factors include:
- Amenities: How well-established is the neighborhood?
- Are there parks for children nearby?
- Plenty of sidewalks?
- The walkability of a neighborhood or home plays a factor in how popular it will be with renters.
- Schools: For renters with children, the quality of schools in the district is a huge consideration when choosing a rental home in Hampton Roads. Southeast Virginia has many high-quality schools, and the top-ranked schools enjoy more demand for homes in their district.
- Features: Factors such as the age of the home and its amenities should also play a role when setting a rent price. Large backyards and new appliances can drive the rent price up. Upgrades such as new flooring, jacuzzi tubs, or smart home features increase the home's value and its rent price.
Experiment with Your Rent Price
To hit the bulls-eye when it comes to pricing your rental home, you will likely go through a period of experimentation to see how the market responds. When the home is first listed, start at the "high end" rent amount and carefully monitor your inquires to gauge its effectiveness.
Ask for feedback from prospects after they've looked at your rental home: if their opinion is consistently along the lines of "it's out of my price range" or "It's too expensive for what it offers," that's a red flag that your rent rate is out of range.
Hiring a property management company in Hampton Roads helps with this process as they can give you valuable feedback about the inquiries on your home and help you cut down on time spent experimenting. If there is a lack of response to your rental listing, it may be time to lower the rent to get a better response rate.
Be Flexible with Adjustments
Investor landlords typically have a goal to maximize their profits, but staying realistic to what your home is worth in rent is the key to making a profit on your rental home in the first place. The time of the year a home is on the market is also a factor in how much it will rent for—typically, summer offers higher rent possibilities than winter.
If you are inflexible to lowering your "high end" rent rate, be prepared for extended vacancy times with your home. Continuously monitoring the rent rate at each lease expiration and during turnover assures your home stays on par with market trends.
Conducting a market analysis and setting your rent rate can seem overwhelming. Hiring an able and experienced property management company in Hampton Roads takes the guesswork and stress out of the process of renting your home. Renters Warehouse Hampton Roads can help you find your bulls-eye number easily with our free Rental Price Analysis!
Setting a rent rate is just one aspect of putting your home on the market! Your property also relies on an eye-catching listing to pull in prospective tenants. At Renters Warehouse Hampton Roads, we know that writing the listing for your rental home can often be more stressful than finding the right rent rate! That's why we offer our FREE checklist to craft the perfect property listing! Download your copy, and get a leg up on captivating your future tenants.