Property owners with homes on the rental market often ask us if they should hold out for that top dollar rent on a property. Sometimes, that can be a mistake. It’s understandable that you want to get as much rent as possible coming in every month. However, you don’t want to end up losing money just because you wouldn’t come down on your rent. The best way to explain that is to give you an example:
Let’s say we are looking at a three bedroom, two bathroom house in Tampa that has a market range of between $800 and $1,000 per month. Knowing that similar properties are renting in that range, should you really hold out for the $1,000 rental price? Take a look at these two strategies, and you’ll get an idea of why it might make more financial sense to come down a little on your rent.
Here’s Strategy A:
• You rent the house out at the maximum of $1,000 per month. On a one year lease, you will bring in $12,000 per year.
• Because you waited until you found a tenant to pay $1,000 per month, it took you three months to rent the property.
• The three month wait gives you a loss of rental income totaling $3,000. This means that in the full year, you net $9,000 on your property.
Here’s Strategy B:
• You decide to come down a little on price, and rent the house out for $900 per month. This would bring you $10,800 in annual income on a one year lease.
• It only takes one month to get a good tenant because for $900, you’ll get a lot of tenants applying for that house.
• The one month it took to find a tenant gives you a loss of $900, which brings you $9,900 total in a year.
As you can see, you’re making more money even though you are charging a lower rent. You also have a great tenant in your property because you had several applicants to choose from.
This example illustrates why I think it’s a better idea to find a lower price point. You will have better prospects to choose from, you will make more money over the term of a year lease and you will get the house rented out sooner.
If you have any questions about pricing your house to move quickly, please contact us at Cavalier Estates Property Management.