One major mistake that new landlords make is to forego learning how to calculate a fair market rental rate for their property. This results in rental property owners losing money every month because of under-or overestimating how much rent they could be asking for. This is especially true as rents continue to rise across the country. To keep pace with the market, you have to increase your monthly rent, or else you risk leaving money on the table. However, when you have an occupied property, knowing how to raise rents the correct way becomes especially important. While good advice on how to do it abounds, the primary and most important tool you have to master and use is the rental property assessment.
Fair Market Rent
The fair market rent of a property is what similar properties that are nearby are renting for. Since the market rent differs for each neighborhood, you will need specific and local numbers in order to calculate correctly.
For an Isle of Wight property, you first need to find out what the other landlords in your locality are charging their tenants. Comparable properties, or comps, are similarly sized rental properties that you have to look at with features akin to yours. You will need to do some sleuthing to get this information. A good place to start would be posted rentals and the local classifieds.
Or, get in touch with an Isle of Wight property management outfit like Real Property Management Dominion, who would have a lot of information about the rental market. Three or more comps are needed so you can calculate the average monthly rent and compare your current rate with the result. You now know your property’s fair market rent.
Regular Rental Property Assessment
Calculating the fair market rent is an essential step, it is just the first step in ensuring your rental property is profitable. If you want to maximize your monthly cash flows, you have to re-calculate the fair market rent for your Isle of Wight property at least once a year, or more frequently if rents change very quickly. The shortage of single-family rental homes has caused a surge in rental rates in most markets across the country. You might be charging too low and missing out on additional income every month if you haven’t done a recent rental property assessment in your area.
Still, it’s not just about money. Many property owners hesitate to increase their rent for various reasons. Some are worried that if they raise their rent, their rental property will become harder to lease. Other landlords fear that setting the rent at the going rate will make their rental house less competitive, leading to fewer tenants. Or they might not want to anger a current tenant who has been renting from them for a while. Of course, if you haven’t increased your rent in the past years, your current tenant is likely to be paying way below the rental rate others are paying.
Professional Property Management Pays for Itself
The reality is that it can be very time-consuming, not to mention nerve-wracking, to figure out if you are charging the correct amount in rent. Even after all your market research, you might still be wary about raising your rent without losing your tenant. Hence, having a professional property management company assess your property and set your rental rate could be your best option. One thing that hinders a landlord from hiring a property manager is the cost. But when you consider that you are losing more money by not charging the right amount of rent, paying someone to manage your property now seems a good deal. A professional property management company can ensure that you have an accurate rental rate and work carefully with your tenants. They can help increase your monthly income, therefore paying for themselves in the long run.
Would you like to know more about what a professional property management company has to offer? Contact us online today or give us a call at 757-395-4274.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.
