Renting out your Columbia home can be very lucrative. You can use the potential monthly rental income to shore up your savings, to pay down any debt or to put towards further investments. Furthermore, you may also able to create wealth through the rising property appreciation rates.
But renting out a property isn’t a guaranteed path to success. There are a couple of property management skills that you’ll need to grow in order to gain any of these potential benefits. Among these things is knowing how to price your Columbia home properly.
Without experience, it can easy to either undercharge or overcharge your tenants. Basically, undercharging your tenants will not enable you maximize your ROI, whereas overcharging your tenants will only make your unit less desirable to prospects.
In this blog, we at the Real Property Group will walk you over 5 tips on how to price your Columbia home to rent.
Why is Charging Tenants the Right Rent Important?
To begin with, charging the right rent can help you to attract great tenants who abide by the terms of the lease agreement.
The right rent will also enable you meet all your expenses. Common rental expenses include property taxes, repairs and maintenance, mortgage repayments, and property management fees. Charging the right rent will also enable you maximize your return on investment.
How to Price your Columbia Rental Home?
As you can see, charging the right rent is key to running a successful rental property. The goal is to find that sweet spot that will ensure you’re neither overcharging nor undercharging your tenants.
Know the Competition
Find out what is already working for your competition. Find out how much they are charging tenants and compare that with their vacancy rates. Typically, there is usually a correlation between vacancy rates and the price of rent.
You can look for comparative rentals in a couple of ways. You can go to check out some apartments in person and see how they compare to your unit. You can also go online and do a simple search on sites like Trulia, Zillow and Hotpads. You can also hire a professional realtor or a property manager may be another option for you, to evaluate your price.
Factor in Amenities
Different homes will have different amenities, and amenities can drive rental price. Below are some amenities that can have an impact on the price of a rental unit.
- Dedicated parking space
- Square footage
- Recent updates
- Desirable views
- Air conditioning
- A good pet policy
- Granite countertops
- Stainless steel appliances
- Open floor plan
- Outdoor space
The more of these desirable amenities you have, the more attractive your rental property will be to prospective tenants. In turn, you can take advantage of the higher demand to ask for higher rents.
Calculate your ROI
How you price your Colombia rental property should also make sense from an investment point of view. The last thing you want is to set a price that leave you little to no margin.
There are multiple formulas for calculating the ROI on an investment property. The following formulas should get you started.
- Net Operating Income
- Capitalization Rate
- Cash on Cash Return
- Annual Gross Multiplier
The Cash on Cash formula factors the potential cash income versus the cash invested in a property. To calculate the ROI, you must divide the annual cash flow (after taxes) by the cost of purchasing the property. Most experts agree that a Cash on Cash return of between 7- and 10% is good.
Alternatively, you may also use the 2% Rule. The rule estimates that the right rent should fall anywhere between 1- and 2% of the purchase price. If, for instance, the property costs you $100,000 to purchase, then the right rent, according to the rule, should range between $1000 and $2000.
Of course, whichever formula you use, you’ll only get an estimate. The best method remains to be proper research and due diligence.
Understand Seasonal Pricing
Some seasons will have some impact your rental price. During the summertime, demand for rentals usually tends to go up. But during the wintertime, it tends to plummet.
The reason behind this trend is that renters usually find it convenient to move during the summertime as opposed to wintertime. As such, you’ll want to make any necessary adjustments depending on the season you find yourself renting out your home.
Apart from seasonality, market demand is also influenced by the state of the economy. If the economy is bad, rental demand can increase. That’s because in a bad economy people may struggle to buy homes and would be forced to rent instead. A poor economy can also mean higher demand for cheaper apartments as people may be forced to downsize.
Examine your Marketing Strategy
After successfully marketing your property, prospects will naturally get in touch with you to inquire about the home. But the number of inquiries you get is a telltale sign on whether you priced your home right.
If only a few prospects call to see the property, then the pricing may be to blame. Also, if you overprice the lease on your home and the location and amenities don’t justify the high price tag, prospects will continue their search.
Many things go into pricing a rental home. But with this information, pricing your Columbia home to rent should be a much smoother process. But if you still find it daunting, then Real Property Group can help.
We have the experience, resources, and dependable contacts to meet all your Columbia property management needs. Get in touch today to learn more!