Every rental property owner’s goal is to maximize the return on investment. Rental prices are an integral part of this overall strategy. A realistic and unbiased approach to figuring out the market rental rates is necessary to this endeavor. In fact, if you can identify the correct rental rates for your property, it can help you lower your vacancy rates.
Conducting a Market Analysis
The best way to determine rental rates in an unbiased fashion is to do a market analysis. This tool takes into account several factors. Geography is important, because you want to compare properties that are near to your own property. You also have to take a look at the size of your home, the condition, the age, and the availability of similar properties in your area.
Calculating Rental Value
The process of determining a market rental analysis is straightforward. You identify similar properties in your immediate area that have rented recently or are still available. Once you identify those homes, calculate the dollar per square foot that they rent for. You also want to take into account the number of days that the home has been on the market. That will help you spot some outliers. Properties that are on the market longer than others often have a problem. Either the condition is not great, or the home is overpriced.
Identifying Market Trends
It’s also important to identify market trends. A good way to determine whether your local market is in an upswing or a downswing is by looking at the average dollar per square foot. If it’s higher in unrented properties than in previously rented properties, you know you’re in a strong rental market.
Once you determine all these things, you can calculate the average dollars per square foot for your own property. Remember that the active properties are your direct competition. You also have to identify any amenities or problems that would require you to increase or decrease the suggested average dollars per square foot for your rental.
To maximize your ROI, position your rental rates correctly. Use market based indices for a rational and unbiased approach. This method is much better than wishful thinking.