Setting the Price For Your Rental Investment
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– Hi, Benton Cotter here helping make your rental investment successful.
Today we’re gonna talk about how to set your rental price for your investment. Now there’s a couple strategy things we’re gonna talk about here. You kind of have to identify what you’re looking for. If you’re looking for maximum cash flow, maximum rent, your house is gonna sit longer. There’s a strategy, there’s gonna be some different play in factors in that. If you really want to get it rented quickly to minimize the vacancy, there’s factors in that and usually low price, but there’s some factors in that. But generally we’re gonna talk about all the best tips and techniques that we use.
We have rented over 10,000 homes. We’ve learned some things with all the catalog. We gathered all that data from that 10,000 homes and we figured out a formula that we think that works really well. Even whatever strategy you’re lookin’ for. First tip is always look at your competition. You gotta do comps, see what’s out there. See what’s out there in the active listings.
That means the ones that are actually still out there marketing and look at the ones that have closed before. A lot of times you don’t have access to the closed ones if you don’t belong to an MLS, a multiple listing service as a realtor. But maybe you can talk to us, talk to someone that you know, see if they can pull some comps for ya. It might be worth it just to say, hey I’ll throw you a hundred bucks, realtor, if you pull comps for me and help me suggest a rental price. Just you wanna see what ones have rented recently in the last 30 to 60 days in your area and see what they rented for and how much they’re gettin’ per square foot and the amenities that they had and such.
So you wanna be able to compare those. You get those old listings, that’s good. You kinda have set the foundation.
Then look at your active listings. And key with that is, look what they’re doing, look what they’re renting for, price yours similar.
But all terms, you can actually evaluate theirs. What we like to do is look at those listings, especially try to pick three that are very similar to yours, size, amenities, even if you’re trying to get year built in the same area. You don’t wanna go too far, maybe hopefully within a mile radius. Try to find those active listings and then see what they got. If it’s priced at $2,000 and you think you can get more out of yours, look what they had.
Did they have not as many amenities do you have? Are they not as close to a community amenity that you have? Maybe a community pool or something like that. So do some analysis on that.
And the best thing to do, we love Zillow, because you can go look on it, look at that active listing and if you scroll down and you click on more details and more facts about the property, you can actually see how long it’s been listed on Zillow, that’s one factor. If it’s more than 30 days, that’s a factor. Usually that means if you want your home to rent faster, you want your home rented in 21 days, there’s something going on there. So look how long it’s been on active listing. They can also have a feature that shows how many people have viewed it and how many people have saved it as one of their favorites to look back at. That’s a great barometer to see what kind of action it’s getting.
If it has tons of views and tons of saves, but it’s been on the market for 60 days, that tells you something. And usually that tells you it’s priced right for the square footage and the amenities it’s offering, but there’s just something wrong with the home. Maybe it’s really bad, ugly carpet or the kitchen’s outdated compared to the rest of the comps in the area. But that usually means indication that it’s priced right, the photo of the front looks good everything looks good on the surface, but when they dig deeper something’s not right.
So you can kinda use that data. Say, hey, if your homes similar but maybe it’s in better shape, doesn’t have any issues like that, that means probably the price is right. You might even go a little bit higher on the price, but you have better quality of a home, yours will rent pretty good. So kinda look at that. Kinda compare those things. I know the good things of hey, if you run some comps you find the three houses that look very similar to yours in the price point, undercut them.
If they rent for 2,000, put yours at 1,960, 1,969, whatever it is. 1,999, I don’t care what it is, just undercut them. Price makes a huge difference when they’re looking. Also, remember the filters on Zillow. If you look at the top, there’s filters that the renters go through. Go through and experience like you’re a renter and try to find your house. Sometimes they filter out. Sometimes they’re very whole number looking on price. So, they might filter out from $1,500 to 2,000. So, don’t put your house at $2,001 ’cause then you’ll miss that $2,000 filter range even though it’s right there. So, be very clever with how you price the home. If it’s $1,500, put it at 1,499 that way you get the searches below that.
That might be the top end of their graph. Don’t do it right above, don’t do 1,510, 20, or 30. Those typically take longer to hide, if you put the bottom portion of the hundreds. Remember be clever with how you market your price ’cause you have to remember what the tenant experience is going through and what they’re looking for, what they’re filtering out. Same thing if your home has three bedrooms but it’s 5,000 square feet, you’re probably not gonna get a lot of people because that big a range they’re looking, well I exaggerated.
But if they’re lookin’ for a house and maybe it’s 2,500 square feet, they’re probably lookin’ for a four bedroom. So if you have three bedroom plus two dens, it might be worth it to convert one of those dens to a bedroom and just add a closet. A few hundred dollar repair to make it rent faster. The goal is you want to rent at a good price, but you don’t want it to sit vacant for two months. Two months of vacancy or even one month of vacancy, that’s a mortgage payment.
Say your mortgage is $1,500. If you would just discount the rent for $50, that $50 will only cost you $600 in a year rather than your vacancy of $1,500 in one month. So you kind of have to play both sides there making sure you know your strategy, to make sure you maximize the most you can get for your rental price without diminishing the days on market.
So, a good thing is also to look at is really kind of, I hate to say it, but be truthful with yourself. Sometimes when we move out of our homes and especially if it’s our home that we moved out that we used to live in, we think the world of it and we think it’s worth so much more than what literally it is. So, you gotta be truthful with yourself. Is this a $2,000 home or is this a $1,500 rental? Be truthful, that’s the most important. Just be real. Understand hey, try and take the emotion out of it.
If you also need to do some repairs, you gotta do the repairs. Make it rent ready. Or otherwise it doesn’t matter what you price the rental at, if tons of people come looking at it but they walk away, usually it means you need to fix something with your home. And then another strategy that we like to do is the rental price is very important. And make sure you’re in the low, don’t stay in the low one hundreds, stay at the mid one hundreds or exactly at the hundreds, around that mark.
But also what I like to do is if I know let’s say my three other comps in the area, they’re all 2,000 but my home’s just a little bit more rundown or it’s missing an amenity that they have, we like to give an incentive. Usually like, we’ll give you two weeks free if you move into our home.
For some reason, that incentive it’s like a sale that triggers something in our mind and so we’ll be able to rent our home even though it wasn’t as good as the other three in the neighborhood just ’cause we gave that incentive and for some reason every loves a sale. But just do that and work on those techniques. Again, it’s an art to pricing your home. We have a huge database, again, we rented over 10,000 homes.
We also have a huge database with Home Union that we can search and pull all this data that can help us determine how to price your home right to get the maximum return on it but also make sure we diminish the vacancy on it. So reach out to us and contact us. We can definitely help you with that. Again, we’re experts in the field, this is all we do all the time. We’d love to do it for your home.