The key to your rental property’s success lies in your rental rate. However, any seasoned landlord will understand that it’s not as straightforward as adding 0s to your tenant’s bill. For your rental rate to be considered “right”, it must be competitively priced and reasonable enough to attract good tenants. Finding the balance between the two will allow you to lead your property to success and find financial stability.
In this post, we’ll discuss how to set the best possible rate for your Florida rental property. We’ll tackle the pricing strategies you can implement to make sure your property remains profitable in the ever-competitive residential real estate market. Whether you’re a new rental owner or have more experience, you can use this guide to maximize your earnings while guaranteeing that your tenants will want to stay for the long term.
Consider the 2% rule, but don’t feel forced to follow it
Chances are, you’ve heard about the 2% rule before—it dictates that your rent per month should be 1-2% of the property’s estimated value. For example, if your property is valued at $300,000, you’d collect $6,000 in rent each month. But while many landlords strictly abide by the 2% rule, remember that it’s not as reliable as comparing your property to others in the area.
Ideally, the rental rate should be subject to conditions like the local market, location, and the current economy. Furthermore, you must take into account the expenses that come with running a rental property, such as taxes, maintenance, etc. which can all cut into your monthly cash flow. If you were to follow the 2% rule, you risk setting a rate that does not allow you to cover your costs.
When considering whether or not to invest in a particular property, you may use the 2% rule to evaluate its income potential. However, make sure to consult a residential property management company to conduct a more comprehensive market analysis once it’s time to set the rental rate.
Consider other properties’ rental rates to remain competitive
One of the most effective ways to set your rental rate is by comparing your property’s rental rate to others in the same area as yours—this is commonly called the “comps” analysis. Examining the rental rates of similar properties in the area will give you a clearer picture of the market, and make sure your property can stack up against its competition.
When conducting a comparative analysis, it’s crucial to choose properties that are similar to yours in terms of location, age, amenities, and so on. For example, if your rental property has three bedrooms and two bathrooms, and was built in the 80s, then you must compare it to properties with the same specifications. That way, you can conduct an accurate comparison of the rental rates.
To find out how much your comps collect from their tenants, comb sites such as Trulia and Apartments.com. These websites have a wealth of information on rental rates, making it easier for you to set a competitive rate. Another way to access this information is by working with a property management firm in South Florida—they will be able to provide valuable, up-to-date insights into local rental rates.
Factor in your property’s stand-out features
Does your property have certain features that other properties don’t have? You may be able to raise your rent if your property comes with amenities that most tenants are looking for, like spacious parking, security, and proximity to schools, retail stores, restaurants, etc. Be sure to highlight these when you write your rental listing—that way, your property’s best features will be what potential renters see first.
Here’s a hack—think about what tenants would want in a rental property. If you’re renting to the younger crowd, they’ll likely want to rent a home equipped with smart features such as WiFi thermostats. On the other hand, renters with children will want to be as close to the school as possible.
Not sure how to write a rental listing? Alternatively, you could ask a property management company to help you highlight your home’s main selling points in the property listing.
Increase or reduce the rent according to the season
Another factor that can affect your pricing strategy is the season. Rental rates tend to fluctuate throughout the year, often due to the economy and the location’s rental demand. Generally, rental rates take a downturn during the winter as people are less likely to move when the weather is unfavorable. This means that if your rental is vacant during the winter months, you may have to adjust your pricing strategy to attract tenants.
Additionally, the demand for rent is also lower when school is in session, as renters with children would rather wait for the school year to end. But don’t worry– in the summer months, rental rates “recover” as most people will move or rent a short-term home for their out-of-state vacations.
Check local laws on rental rates
Some cities, counties, and states put a cap on how much you can raise your rent. As a landlord, it’s vital to abide by the law, otherwise your reputation and rental business will be at risk. To make sure your rent—including the rate, the late fees, and deposits—doesn’t go against legal limits, don’t forget to check with a local property management company.
If your rental property is in South Florida, you aren’t bound by any caps on rent increases. You’re free to raise your rent by any amount but do note that it must still be reasonable, otherwise, your property won’t be able to compete. While you won’t get in legal trouble for setting a high rental rate, your cash flow will suffer as it won’t be desirable.
Price your rental property accurately
Determining the right rental rate is pivotal in running a successful rental property. By considering the strategies we’ve listed above, you’ll be able to set a good rate that attracts tenants and in turn, enables you to generate a consistent cash flow.
At Luxury Property Care, we understand that navigating the complexities of rental pricing can be challenging, especially if you’re a first-time rental owner. That’s why we have a team of experienced real estate managers, prepared to help you determine the optimal price for your residential property. Contact us today at (561) 944 – 2992 or complete our contact form to ensure your rent is accurately priced.