Rental price has a direct impact on the quality of tenants that are placed in a unit.
Well-qualified tenants know they will be approved at any available property for which they apply. They aren’t going to waste their time with properties that are priced too high. The tenants who are willing to pay more are those who have been rejected by other landlords for either having bad credit, unacceptable income levels, or negative landlord references. Allowing a tenant like that into your home is a risk, even if they are willing to pay a monthly rent that’s higher than the market.
When it comes to pricing your property, we advise our owners to think about how quickly they’d like to rent it to a good tenant. That’s the best way to protect your property and your ROI. The long term effects of your price are more important than the cash flow your rental price can provide.
The truth is, you won’t earn any income at all if you have to evict a tenant or wait for someone who is willing to pay your price.
What About Rent Increases?
Most tenants assume that their rent will increase at some point after the initial lease period.
There are some good reasons to raise the rent:
- The lease is renewing;
- The market supports higher rent for properties like yours;
- Your property-related expenses have gone up; and,
- You’re offering additional services, such as landscaping or internet.
Like we mentioned above, tenant retention is critical, and you don’t want to rush good tenants out of your property with risky price increases. When you’re ready to renew a lease and you want to increase the rent, make sure you can justify your reasons to the tenant, and make sure it’s not an outrageous increase.
Good tenants will not want to leave. But, they will take the time to compare the rent they are paying to what other properties are renting for in the area. Make your rental increase reasonable, and let the tenants know that the increase is consistent with the market.
Consider adding value at renewal time, when you’re raising the rent. Perhaps a free carpet cleaning will make your tenants happy, or you could offer to replace an aging appliance. Always give your tenants plenty of notice before you raise the rent, and keep the lines of communication open.
Pricing your rental property is an important part of your success as a landlord in the South Bay or Long Beach. If you need help understanding the market or how to use your price to attract the best tenants, contact us at Harbor Property Management. We’d be happy to help you succeed!