Rent Rate Pricing: The Process Behind Your Property’s Profitability
By Athena Savoglou
As property owners, determining how much rent to charge potential tenants is often complicated. That is why Realty Management Associates is here to do it for you. To gain some insight into how we go about setting rates and making sure your property is swiftly rented and as profitable as possible, read on. We have laid out our process to help you understand the pricing strategy that has proven successful in renting countless properties under our management.
The first question is: where do we begin? The answer is: the market, which is governed by, you guessed it, supply and demand. If there are a lot of rental properties on the market in relation to the number of potential tenants looking, then you will need to low-ball your asking rent. Conversely, if there are many tenants looking, along with a shortage of rental properties, you will be able to ask a higher price for your property.
Aside from supply and demand, there are multiple factors in play when determining fair market rent. Some things to consider are:
- Single Family or Multi-Family
- Age of property
- Quality of finishes – (builder basic, or upgraded finishes)
- Location and neighborhood
- Available rentals with matching criteria in the general vicinity
- Vacancy stats
When determining the appropriate range at which to set the rent for a property, one must choose whether to set it at the high or low end. Aside from supply and demand, which has already been assessed at this stage, one must decide how long they are willing to wait for a tenant. Each has pros and cons. If rent is set on the high end, there may be a longer wait for a tenant and some time with no rent at all coming in. Also, rentals that stay on the market longer than a couple of weeks suffer from exposure exhaustion. They get pushed further and further down the online listings. Additionally, tenants may make the unfair assumption there is something wrong with the unit, that is causing it not to rent, making the rental more and more challenging to rent, the longer it is listed. On the other hand, if rent is set on the low end, there will be more tenant interest from the beginning, but the rent will be lower. What must be calculated is whether the time without a tenant is worth it financially (i.e. whether the increase in money will add up to the missed rent in the meantime).
At RMA, we want to maximize the opportunity for profitability for each client, so we begin at the high end of the rent range, with consideration for seasonality. We then monitor the activity your property attracts. If there is significant activity, we keep it high; if there is low activity compared to other like properties on the market, we reduce the price by about 25% of the range differential. We continue to monitor activity weekly, and diligently respond to the market in finding you a suitable tenant. This is precisely the strategic process that has proven successful for countless clients.
To learn more about rent rates in your area, please feel free to read the quarterly NARPM reports on our website’s blog section. We hope this sheds some light on how RMA does what we do!"
‘Tis the Season to be Grateful and Giving!
Thanksgiving is the season to remind ourselves of the power of gratitude, and Christmas brings out the giving side in most of us. Several years ago we introduced a service to act as your holiday elves by delivering a thank you gift in the form of a gift card to your tenants in your behalf. Over the years this service has grown in popularity to the point where, last year, it required many staff hours to process the thank you cards and handle the bookkeeping as well as a fairly significant cost in postage. In the past we have not charged a fee for this service, but in anticipation of this year resulting in even higher demand than last, we will additional staffing costs to process the requests, which means unfortunately there will be a small charge for this service. The Visa Gift cards that we have typically used carry a very steep merchant fee. We are considering substituting with a local retail gift card instead, to avoid merchant fees. In this way, our small fee will not result in a higher overall cost to you. If you have any thoughts on this, please let us know. Email firstname.lastname@example.org with your suggestions.
Please look for details on our Holiday Elf program in our December newsletter.
The maintenance updates only apply to those of you who have pre-ordered these preventative maintenance services. If you didn’t opt in for a service you read about in this newsletter, and would like to schedule a service, just email Spencer@rentalsinboise.com to let him know.)
The following services were completed in October:
- Fall lawn treatment
- Some Sprinkler blow outs
November services are as follows:
- Fall yard clean up – scheduled for the week of November 11.
- Continuation of Sprinkler blow outs
- Gutter clean outs
If you want your property added to our list for any of the Fall services, please email Spencer as soon as possible. email@example.com
Vendor billings for pre-elected optional maintenance items received prior to closing our books on the 25th will appear in your November statement.
There are no special accounting items this month.
If you have been locked out from access to your client portal, please contact Karen@rentalsinboise.com. Karen can also assist you with any questions you may have about your statement.
This month’s tenant newsletter features an explanation of why RMA allows only LED lightbulbs. Sometimes it may not be readily apparent, but they are the safest and most energy efficient, which benefits tenants and owners alike.
Since adding our monthly crossword puzzle, we have seen an amazingly successful 30% increase in readership! This month, we feature another crossword puzzle, the clues for which are buried in our Reminders sections as well as the feature article.
Check out our tenant newsletter this month: https://www.rentalsinboise.com/november-2019-rma
Upcoming Changes To Tenant Services
Heading into the new decade of 2020 RMA will be making some improvements to tenant services. More information will be available in December.
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!