Rental Rate Pricing Philosophy
Who determines fair market rent? It’s very simple – the market. It’s all about supply and demand. When it comes to determining a marketing price for a rental there are many factors to consider, some of which include:
- Single Family or Multi-Family
- Age of property
- Available rentals with matching criteria in the general vicinity
- Vacancy stats.
Once a rent range is determined, selecting the starting marketing price is the next step. Often investment owners have their own idea about what fair rent should be. This can be influenced by a real estate agent or seller who projects their own enthusiasm into the reality of the current rental market. Unlike marketing other products, where salesmanship, value propositions or uniqueness can drive price, tenant interest is going to be affected mostly by one thing – price. So then it comes down to bottom line returns. Do you hold out for the top of the range rent at the risk of taking longer to find a tenant? Or do you want to come in at a competitive price for a quick turn? If you want to test the high end of the market it could take longer to rent. Is a full month of lost rent worth it to you to gain a couple of hundred dollars a month? Assuming estimated lost revenue of 1 month with a standard tenant turnover, an extra $200 per month in rent for the remaining eleven months would equal $2,200. If you hold out for the top rent and it takes two months to rent, you’ve already lost one full months rent – let’s say $1,500 – plus you’ve paid a minimum fee for management, utilities, maybe lawn mowing or snow removal, and of course the advertising costs. So you’ve already lost any gain you thought you would be getting from that higher rent.
Over 37 years of experience, Marc Banner, owner of RMA has developed a pricing strategy that has proven successful for all standard rental properties. Based on current market conditions a rent range is established. We advertise at the high end of that range for a week to test response. If we are not getting satisfactory activity, we will reduce the price by about 25% of the range differential. Each week we evaluate activity and will continue to drop the price, within the rent range, until we find the price the market will bear.
It sounds harsh, but the rental market doesn’t care what your overhead is. It is driven by supply and demand, pure and simple. Our responsibility as property managers is not to meet your cash flow expectation or need, it’s to place a quality tenant in your property at the best rate the market will support, and to keep vacancies to a minimum.
- Sprinklers on city water are in the process of being turning on now.
- Sprinklers on irrigation water will be turned on later next month. The unusually high level of water flow this year is creating conditions potentially damaging to sprinkler equipment.
- Tenants have been advised not to turn on irrigation systems themselves due to this danger. Once the water flow subsides, it will be safe to activate sprinklers. In the mean time we are still getting plenty of rain to keep lawns and plants well watered and healthy.
- Water heater inspections are underway
- The rain has been slowing down the yard spring cleanup, but all properties that signed on for this service should be completed within the first couple of weeks of May.
Statement Access Change
In April we upgraded our software program, which resulted in a change to your owner portal login.
- You should have received an email from firstname.lastname@example.org to create a new Owner Web Access.
- Your username is your email address and you may create your own password.
- You will continue to access your owner portal by selecting Owner Login at our website - rentalsinboise.com.
- Best Overall Maintained Yard
- Most Improved Yard
- Best Lawn
If you have any questions about this, please contact Karen@rentalsinboise.com
First Quarter Vacancy Report
Vacancy stats. are in! Visit our BLOG for details.
In April we launched our first annual Yard Competition. Few people seem to have a spare moment these days. With heavy demands on time, when it comes to the care and attention to detail a tenant will pay in keeping their home to standards you would like, it’s often the yard that will suffer. We wanted to give our tenants an incentive to take better care of your yard – so we created the Yard Competition!
Lucky winners of this competition will receive free tickets to a BSU football game plus restaurant gift certificates and other swag. There is an opportunity to win in three different categories:
Tenants opt in to this competition by submitting photographs of their yard as it looks now, in early spring. We then review what the yard looks like in July and again in September. In early October our RMA staff selects a winner for each of the categories, just in time to catch some local football games.
What Are You Interested In?
This newsletter is intended as a resource and communication platform for you. If there is a topic, relevant to the management of your investment property, that you would like me to write on, please let me know!