You can't wait to increase your passive income in 2024, and you're eyeing homes in California for your next rental investment property. Smart thinking.
Research shows that the median price of rent in California in 2023 was $2,116, higher than the $1,739 national average. The higher rent price stems from several factors, like a limited housing supply, the state's popularity, and economic growth.
How do you go about determining your rent prices? Rental analysis can be a challenging aspect of portfolio management for a first-time landlord. Let's explore tips for coming up with a fair yet satisfactory rate.
Perform Comparisons
A quality rental analysis involves comparing your rental home with similar rental homes in your area. A property management company with a home listing on their website can easily help you perform this comparison. Look for homes with similar numbers of bathrooms and bedrooms and similar square footage.
The next step involves calculating the average rental price of your comparable properties, or comps. Use this figure as the baseline for the amount of rent you'll charge for your property. Adjust your price according to the differences you notice between your rental house and the comps during your rental analysis, including the following:
- Parking
- Lease terms
- Utilities
- Upgrades
- Condition
Remember that you may be able to charge a higher rent amount in a high-demand area versus a lower-demand one. A location with a high vacancy rate may require you to choose a lower rent price.
Consider the Season
Factor in your rental market's seasonality when figuring out how much to charge for rent at a particular investment property to add to your rental income. Rent prices may vary based on the weekday, month, or season.
Prices for rent might be higher during the summer and spring months, as more people seek to move then. You may have to charge less during the winter and fall months, when demand isn't as high.
Consider also adjusting your investment home's rent price according to your desired lease length for a tenant. Charging more for rent is typical for a six-month lease or month-to-month lease versus a 12-month lease.
Promote Your Property Wisely
Promote your property's value, not just the price, when advertising it. Highlight your property's features and benefits to make the home stand out from your competitors' properties. These features include convenience, security, design, amenities, and location.
Use top-quality videos and photos to showcase the home and draw more interest. Consider also offering incentives, like referrals, freebies, or discounts, to boost your property's occupancy rate.
Help With Portfolio Management
Determining how much rent to charge at your various properties is a complicated part of portfolio management. Performing a rental analysis may help you pinpoint a fair rate based on what nearby homes are renting for. Consider the season when choosing your rent price, too, as prices are typically higher in summer and spring.
At Residential Equity Management, we offer high-quality property management services. We can also perform a free rent price analysis for you so you can maximize your cash flow from your investment. Request an analysis today, and let us help you boost your bottom line!
