One of your largest expenses as a real estate investor is vacancy. Vacancies are costly, and the money you lose on an unrented property is nearly impossible to recoup. There are several strategies that will help you avoid long vacancy periods, and one of the most important things you can do is price your rental home correctly. Pricing is key when it comes to minimizing vacancy. You don’t want to scare off renters with a price that’s unreasonably high. On the other hand, you don’t want to lose money by pricing your property too low.
Accurately pricing a rental home is both an art and a science. It requires a deep understanding of the local rental market and an understanding of your tenant pool. If you don’t have the tools or the resources to price your home, make sure you ask for help from a professional Orlando property management company. Property managers work within the rental market every day. We can provide data and insight that will help you price your home correctly.
Avoid Under and Over Doing It When You Price Your Property
Stay away from extremes when you’re pricing your rental property. There are risks with both underpricing the home and overpricing it. If you underprice your home, you’re going to lose money by not collecting as much rent as you can every month. Underpricing your home while it’s vacant also leads to problems with rent increases. It will become more difficult for you to catch up with market rates.
Overpricing the home will only lead to longer vacancy periods. Those extended vacancies will cost you a lot of money. In addition to increasing your vacancy rate, an overpriced home will expose you to unqualified tenants. Good tenants have many choices when it comes to finding a place to live. They will not pay your high rents. However, tenants who cannot get approved elsewhere will be willing to pay extra rent. Prospective renters who show an interest in an overpriced property are likely to have been evicted previously, have bad credit, or terrible landlord references. To get a good tenant, you cannot overprice your home.
The goal is to find a median price tag based on the market value of your property. Check comparable properties in the area with the same or similar features and base your price on that. Talk to a property manager about conducting a comparative rental analysis so you have the most reliable data available before you make you pricing decision.
A number of factors need to be considered as you are deciding on a successful price for your rental property.
Location and Your Orlando Rental Property
Location is one of the most important factors in the price of your rental property. Good tenants are willing to pay more for a property that’s in a desirable location. If it’s in a good school district with an easy commute to work, you’ll be able to ask a little more for your home. However, if your property is located in a neighborhood that isn’t so great and a lot of the neighboring homes are dilapidated and run down, you probably won’t be able to ask as much.
Orlando is a large rental market with a lot of diverse neighborhoods. When you’re choosing an investment home, consider its location because it will impact the price tag you put on that rental. Consult with real estate professionals as to the economic trends in the area. You can also research crime statistics or talk to the local police to get an idea about the crime rate in the area.
Rental prices can change depending on which side of the street your property happens to be on. It’s important to take a detailed, nuanced look at the location of your rental property as you’re deciding on a price. A new one-bedroom loft in downtown Orlando will be priced much differently than a four-bedroom older home in a more remote suburb.
Pricing Orlando Rentals According to Size
Size actually does matter when it comes to Orlando rental real estate. Square footage is one part of the equation – obviously, the more living space the property has, the higher the price tag is likely to be. However, it’s not just square footage that matters. The price will also depend on how that square footage is used. A 2,000 square-foot property with just one bedroom doesn’t make a lot of sense to most renters, so it will be hard to lease a large one-bedroom for top dollar.
Bathrooms are also important, and should match the number of bedrooms in the home. When you have a two-story home with four bedrooms but there’s only one bathroom, you may have a hard time selling that concept to renters. A home with multiple bathrooms will be much more appealing, and therefore can cost a little bit more in rent every month. When it comes to a single-family home or even a townhome or a condo, properties with at least three bedrooms and two bathrooms are always going to do better on the market. They will rent faster and they will rent for more money. Keep that in mind when pricing your rental property.
Season Pricing Considerations in Orlando
Generally, Orlando is warm and sunny all year long. However, there are distinct seasons to the rental market, and the time of the year is an important factor in how you price your property. There are pinnacle months in the rental real estate industry when property is going to rent much quicker and at a better price. The summer months are the peak time because school is out, so people are more willing to move. Families with children are less likely to move during the school year.
In the winter and over the holidays, the rental market slows down in Orlando. People don’t typically relocate during November and December. You may find you need to drop your price a bit during those slow winter months. However, in the late spring or the early summer, you don’t need to worry so much about a lack of tenant interest. As long as the market will support a higher price, you can inch towards the higher end of your rental range.
Property Condition Affects Your Home’s Price
Unless you’re going to add new and larger rooms onto your property, there’s not a lot you can do about its size. And, you cannot move the property you currently own into another neighborhood, so there’s not much you can do about its location. As a landlord or an investor, you have very little control over the market. However, there is one thing you can control which impacts the price of your home. That would be its condition.
In our experience, ninety percent of rental properties lease within the first 30 days of being on the market, as long as you have them priced correctly and the condition supports that price. Your property’s condition has a big impact on the amount you can charge in rent. You need to keep the home clean and tidy. It needs to look fresh and ready for renters when prospects come to view it. Take care of any maintenance items, and consider making a few inexpensive upgrades and updates to attract the attention of good tenants and add a little extra to your rental price.
Small investments can help you earn more in rent. For example, replacing outdated appliances with energy efficient appliances will give your kitchen a new look. Pulling up carpet and installing tile or other hard floors will look better and be more appealing to tenants because they’re easier to keep cleaning. Spend a little money on landscaping and curb appeal. Tenants will notice, and they’ll be willing to pay more for an attractive, well-maintained home.
Pets Should be Considered
Pets are definitely something you should consider when pricing your home. To most people, pets are like family, and tenants with animals they love are never going to rent a home that doesn’t welcome them. Statistically, this is a large part of the market. Over 60% of prospective tenants have pets. Pet friendly properties always grab the attention of animal loving tenants, and you can usually earn a little more on your property by charging pet rent. Asking for $25 or $30 per month per animal will increase what you earn. Not only do you have more rent coming in every month, you’ll also rent your home faster, and you’ll have it occupied by a good tenant.
Before you price your property, it’s a very good idea to get a complimentary Comparative Market Analysis (CMA) from a property manager who knows the market well. This will determine the market value for your rental property and will make sure you have it priced correctly. It will also be sure you are receiving the full return of your investment.
There is a lot to think about when pricing your rental property. If we can be of any assistance or you have any further questions, please contact us at Specialized Property Management in Orlando.