How do you know when you've set the rent too high for your Detroit Metro rental property? If your property sits vacant or you experience frequent tenant turnover, you might need to lower the rent.
Setting the appropriate rental rate for your properties is one of the most important parts of being a successful landlord. Your properties lose money when the rent is too low—or too high.
How do you know how to set the right rental price? What can you do if it's too high? Let's look at the impact of your property's rental price and what to do if you need to adjust.
Finding the Right Tenants
Your properties need to stay occupied with quality tenants to get the most out of your investment. When you price your properties correctly, you'll find it easier to attract and keep the best tenants.
Tenants have a pretty good idea of what they should pay for a rental home in the Detroit Metro area. Even if you're not sure what the rent should be, tenants do their research to make sure they aren't overpaying for a rental home.
Depending on your specific property and the amenities you offer, potential tenants know if your property is priced too high.
Your property could be the best on the block! You might offer amazing amenities to help justify the price you've set for your property.
However, if you're struggling to land good tenants who will pay the price you're asking, your home might be overpriced. The high price on your property could be turning good tenants away before you have a chance to meet them.
If you find the homes around your property are consistently rented while yours stays empty, it might be time to consider lowering the rent.
When it comes to setting the rent, it's not all about the property itself. This is when rental market research becomes a valuable tool.
Take a look at the neighborhood. Look at property values. Talk to realtors in the area and get their input on the market.
Consider your costs for property taxes, insurance, and routine maintenance. Calculate estimated utilities for the property. If your rent is so high that tenants can't afford water and electricity on top of the lease amount, you probably need to lower the rent price.
Also, make sure your rental price supports any upgrades you make to your property. Don't add expensive upgrades if you can't cover the cost with a rent that works well for the neighborhood.
Weigh the Cost of Vacancy
You might have a price in mind for your property. However, the rental price you "want" versus the rental price that "works" might not be the same thing.
You've put money into upgrades. You've added some features to attract your ideal renter. You feel the property is worth what you want to charge tenants to live there.
Is holding on to your "dream" rental price worth months of vacancy until you find a tenant willing to pay that much?
It's critical to understand the expense of a vacant property when setting the rental price. Without monthly rental income, you won't have the cash to offset your out of pocket expenses.
You'll have to cover the monthly mortgage, utilities, and insurance on your own until that perfect tenant moves in and starts paying rent.
To be a successful landlord, you might have to put your wishful rental price to the side. You'll have a better return on your investment much sooner when the rental price is appropriate for the property.
If You Think Your Rent is Too High
Don't panic! Setting the rent too high is a common issue.
Without help, setting the appropriate rental price can be a hit or miss process when you first begin as a landlord. It can also be challenging to know how to set the rent if you add a new Detroit Metro property to your portfolio—but you live out of state.
Working with a property management company is the best way to set your rental price at the right amount for your property. Whether it's a new-to-you property or you need an adjustment to a property that struggles to keep good tenants, the best property management company takes the guesswork out of the process.
Don't lose money on your rental properties! A higher rent price doesn't mean more money in your pocket if the price is out of line for your market.
Get a quick answer to your rental price questions. Let JMZ Management help with a FREE Rental Analysis on your property.