For people with a small number of rental units it can be quite difficult. You either don’t have frequent enough vacancies to test the market or your units are different sizes and can’t be compared. Other people look to their neighbors for anecdotal information. We’ve all heard of the person down the street getting $3000 while everyone else is getting $2500.
Step 1: Research
To start, you have a few different pricing options. Market research is the best way to figure it out. In a market like Long Beach, it can be a little difficult because there is such a variety of rental property. You can start off with a website like Zillow and research similar properties in the area that are for rent. You want to make note of the amenities such as:
- Private outdoor space (backyard or balcony)
- Bathroom/kitchen upgrade
- Hardwood floors
- Allowance of pets
Parking in a parking impacted neighborhood can sometimes be worth up to an additional $200 per month while not have laundry on site can be a deal breaker in a lot of cases. After you do this research you should have a general idea of the property is worth.
Step 2: Set The Price
Now that you have a general idea of what your unit is worth, you can set the price. There are a few different options here as well. If you have time to test the market you can start a little high. If you are in a hurry to rent the place, you can start lower to speed up finding a tenant. Once the property is properly advertised, you will find out how close you got. Now, if it doesn’t rent, it’s time to start part two of the process, which is adjusting the rent.
Step 3: Adjust The Rent
The best way to do it is constant analysis of the vacancy as you put it on the market. The data points that you are looking at are the amount of phone calls, the quality of applications you are getting and the feedback you are receiving from the people who view the places. Since properties differ widely in the community I operate my business, I have to judge them quiet differently on their size and quality. Higher end properties or larger properties will naturally get less phone calls than a studio or one bedroom.
If you find that you are getting zero or a few phone calls over the first 2 weeks, you’re probably high on the price. If you are getting a few phone calls per day with either no requests for applications or poor applications, you are closer but still too high. You should never go more than two weeks at the same price without a price reduction.
Step 4: Collect Feedback
The feedback you receive from people who have viewed the property can be imperative when finding the right price. Most of the feedback will be different but it indicates the price is too high. If you find that all the complaints are about the same item, it might give you the options to address that item and get the price you wish. Obviously, some items can’t be addressed, but if the complaint is about old carpet, no dishwasher or anything that can be cost affectively addressed, you have the option to fixing it to get the higher price.
If you take these steps, I have no doubt that you will find the correct price for your rental unit.
Related: Choosing The Right Tenant
Note: This article makes a few assumptions. Your property is in the condition in which you intend to rent it, the property is properly advertised and you have an efficient and easy way to show the apartment. Also, renting a property out during the winter holidays can generally take more time than the rest of the year.