Let’s talk about pricing your rental property, and what you can do to maximize your rental income.
You might think that in order to earn more, you have to charge more. It sounds simple enough. However, if you charge too much, you’re likely to face a longer vacancy period. You might find yourself approving a tenant who isn’t qualified because they’re the only applicant willing to pay your too-high rent.
The rental value that you establish has to be profitable. However, it also has to be competitive and aligned with the current market. LA is notorious for having high rents. You’re going to make money with your rental property, and if you want to maximize what you earn, you’ll set the right rent price and you’ll be strategic about rental increases when it’s time for the lease to renew.
Setting the rent price for your rental property is not just a decision that determines how much revenue you collect. It also affects the demand for your property and the quality of your tenants. Knowing how to set the right rent price will keep you profitable, attract the right tenants, and boost property value. Here are some strategies for setting the right rent price.
Research Comparable Properties in your Area.
Before pricing your rental property, it is essential to research the Los Angeles market to determine the average rental price for similar properties in your target area so you understand what you are competing against. The LA market is huge, so make sure you’re pinpointing the exact pockets that your rental property is in. As property managers, we conduct our analysis based on zip code. You’ll find that rental values and demand change from area to area especially in the canyons or near the beach and view, and you want to be sure you’re accessing data that’s reliable, hyper-local, and specific to where your investment is located.
A lot of landlords will check online listing platforms for similar rental properties in their area when they’re studying the market and settling on a price. This can be a good starting point, but remember that to effectively price your property and maximize what you earn, you need the best and most recent data possible. You won’t get that from Zillow. You will get that from a local LA property manager as they have access to MLS to see the actual rented price history.
Evaluate all factors when you’re comparing your property to others, such as location, size, condition, and amenities offered. If your research reveals that your rental price is too high compared to similar properties in your area, you may need to reconsider your pricing strategy to remain competitive. If the price you were thinking seems too low, go ahead and raise it when you begin your marketing. If you’re getting a lot of attention and interest at the higher price, you’ll know you were right to raise it.
Reasons to Raise Your Rental Price
Properties with specific perks and features deserve a higher rental price, as they provide more value to tenants.
Some of the unique features that can influence rent prices include:
- Outside space
- Parking
- Extra storage space
- Appliances such as in-unit washers and dryers
- Upgrades and updates like stainless appliances and hardwood floors
You can also offer additional services such as landscaping, cable, or internet services to make your rental property more attractive to tenants. By highlighting the unique features of your rental property, you can justify an increase in rent price and attract high-quality tenants.
Allowing pets is another good reason to raise your rent. LA tenants moving in with dogs and cats will be willing to pay pet rent in order to live with their furry family members.
Lease Renewals and Rent Increases
Pricing your rental property is not just a one-time task; it’s an ongoing process.
Over time, the market evolves, and you may need to adjust your rent price accordingly to ensure that you continue to maximize rental income. If the market becomes more competitive during a tenancy, you’ll want to raise your rent when it’s time for the tenant to renew their lease. Be careful of any limits that may be imposed when your property is covered by the rent stabilization laws in place, and always make sure you can document your reason for the increase before you present the new amount to your tenant.
Most LA tenants expect their rent to go up every year. However, you want to remain competitive in order to retain those residents. To maximize what you earn, you’ll avoid turnover and vacancy costs that can become expensive.
Setting the right rent price for your property is inevitably one of the most crucial decisions that you’ll make. The rental amount dictates who will apply for your property, how much you’ll earn, and whether you’re likely to retain your tenants for the long term.
By conducting thorough market research, calculating the rental value of your property, highlighting its unique features, adjusting the rent price over time, and seeking professional help from experienced property managers who know the market, you can ensure that you maximize your rental income while attracting the right tenants and boosting property value. If your property is in rent control or RSO, you need to check the LA City Housing website to see how much you are allowed to increase. It’s normally the base of CPI (Consumer Price Index) reset once a year.
Remember that pricing your rental property significantly affects your investment return, so it is a decision that requires caution, assessment and regular review. We can help you. Contact our team at Earnest Homes, and we’ll tell you what we think your best rental price is for the current market.
