Are you bringing your property to the rental market for the first time? Or, are you struggling to fill a vacancy? If so, you’d need to determine the correct rental price to charge.
The rental price can make or break your efforts of renting out your Anaheim property. Your goal should be to find the perfect balance by not underpricing or overpricing it. The right price keeps your property profitable and competitive in the rental market it’s in.
In today’s blog, we’ll walk you through 6 tips on how to price your Anaheim home to rent.
1. Examine the Comparable Properties
Look at the competition. What are they charging for comparable rentals? When looking at comparable units, zero in on rentals that look as similar to yours as possible. The following are some things to keep in mind as you go about the process:
- Look at units that share the same location as your rental property. Different sections of a town will come with different price ranges especially if they’re in more desirable than others.
- Look for properties that are the same size with the same number of bedrooms and bathrooms.
- Look for similar rental types. If your property is a single-family home, then look for other single-family homes. Also, if your property is new construction, then compare it with other newly constructed properties.
But where should you be looking for comparable properties exactly? This can be pretty daunting when you’re just starting out as a landlord.
You can look for “comparables” in a variety of ways. One simple way is to go online on sites like Trulia, Zillow, or HotPads. The good thing about these sites is that they have filters, which you can use to narrow down to what you’re looking for.
Another way to look for comparables is in-person. Interview various landlords and find out how much they are charging for similar units. You may also want to use that opportunity to find out whether there is good demand for the property. Lastly, you could seek a professional opinion from a property manager. Their help could go a long way in ensuring you price your property correctly.
2. Make Adjustments Based on the Amenities
Amenities play a huge role when it comes to pricing a rental property. A home with desirable amenities will rent for more than one without. You should factor in the following things when setting the rental price:
- Updates – A unit with recent updates will rent for more. Updates may include a renovated kitchen, hardwood floors, repainted walls, or updated appliances.
- View – A property overlooking a beautiful garden or having skyline views will be more desirable than one overlooking a parking lot.
- Size – A bigger home will be more desirable, and expensive than a smaller one.
- Furnishings – If the space comes partially or full-furnished it could garner higher rent prices in certain markets.
- Floor level – Higher floors in multi-unit rentals are usually more desirable than on lower floors. A walk-up is an exception, though. After the 3rd floor, the higher floors become less desirable due to the hassle of going up and down.
3. Do the Math
The goal of investing in real estate is to make money. As such, determine whether the rent you wish to charge is going to lead to profits. At the minimum, the right rent should be able to cover all of your expenses. Examples of expenses you should expect to incur when renting out your Anaheim rental property include:
- Mortgage payments (if any)
- Maintenance and repair expenses
- Advertising costs
- Property taxes
- HOA fees (if any)
- Closing costs
- Vacancy costs
- Accounting fees
- Property management fees
- Property improvement
You can calculate return on investment (ROI) using any of the following metrics:
- Cash flow – You’ll need to subtract expenses from the gross rental income.
- Cash on cash return – This is the annual cash flow divided by the invested equity.
- Net operating income – This is similar to cash on cash return only that it doesn’t factor in mortgage expenses.
- Cap rate – You’ll need to multiply the Net Operating Income by 12 and then divide the outcome by the purchase price.
According to experts, a good return on investment is at least 7%.
4. Evaluate the Market Demand
Ask yourself – is there enough market demand for the kind of property I intend to rent out?
A good indicator of market demand is inquiries from prospective tenants. After marketing the property, are prospective tenants calling to schedule a property viewing? If not, it could be for several reasons.
One, it could be that you have overpriced the property. If you set your rent too high, prospective tenants will stay away. Two, your marketing strategy may not be extensive enough. Or three, it’s possible that there is little demand for rentals in the area your property is located.
5. Re-adjust the Rental Price to Fit the Market Demand
Pricing your rental property isn’t a one-time event. To remain competitive, you must constantly reevaluate it to meet the market demand. When the economy isn’t performing well, for instance, prices might go down based on people spending ability. However, when the economy is performing well, pricing can increase.
6. Hire a Property Management Company
If you’re just starting out, hiring a property management company may be the best decision you could make. Besides helping you price your Anaheim rental property, they could help you manage the day-to-day operations as well. A property manager can help with marketing the property, collecting rent, maintaining the rental, screening tenants, and more.
The right rental price leads to profits. But there is a science behind how you determine it. For expert help, please get in touch with Home Choice Property Management. With over 10 years in the business, we can help you maximize the return on investment of your Anaheim rental property. Contact us today to learn more!