In hot housing markets like Orlando and Daytona, it only makes sense to do your homework before deciding on a rental rate. Perhaps you've never had to choose a rate before, or you've had very steady tenants for years and are not sure what to charge now that they've moved out. No matter your circumstances, the rental rate choice is a big decision.
If you choose a rental rate that is too low, you risk attracting so many potential tenants that you waste time in the tenant screening process. You'd also leave money on the table. However, if you price your rental rate too high, you may get very few tenant applications and lose your tenants quickly to cheaper options. Finding a sweet spot means offering your tenants a high-value opportunity without becoming a bargain-basement rental unit. So how can you make sure your rental rate is sound? Get to know the area around your Central Florida neighborhood.
Diving into Market Analysis
The core of a rental rate is dependent on the market; basically, a rent becomes "too high" or "too low" relative to the many properties surrounding it. Areas with way too much housing in good shape will have artificially lower rates because of competition for tenants. Regions with few accommodations will be able to charge quite substantial rates for well-maintained units. Here are the factors to consider in your market analysis before setting a rental rate:
- First, review the percentage of rental homes as well as the total number. Many communities are nearly entirely dominated by rental properties, while others are generally primary-residence, owned homes. The number of available homes will always affect how competitive the market is.
- Rental tenants often have a preference for a single-family residence or a multi-family unit, and the availability of each will affect your rate. For instance, if you are renting a single-family unit in a community with tons of rentals but very few of your type, you may still be able to charge a quite high rental rate for the tenants who don't want to live in an apartment.
- Another critical factor in rentals is the vacancy rate in your area. If there are many vacant rentals, there is a chance that you'll need to lower your rates. This will help you compete for the tenants that do exist in the market.
- Another way to consider your pricing structure is based on the average rent amount per square foot of floor space. Size isn't the only factor in how rentals get priced. However, it is one way to demonstrate to your potential tenants that your price is in line with or better than the competition.
- How high or low are application fees in your area? When application fees are lowered or waived, there is a good chance that the market is competitive on the landlord side. However, when there are many tenants and only a few rentals, landlords may choose to use a higher application fee to discourage people from applying to every single location, including some they aren't serious about renting.
- Another metric of whether the market is competitive for landlords or tenants is the amount of time (typically in days) each rental stays on the market. If new listings in Orlando, for example, tend to be under lease within a minimal amount of time, you may be able to raise your rates. Even with higher rates, you'd still have an excellent pool of applicants!
Expert Property Managers Understand Your Markets
The effort to understand one's local rental market ultimately boils down to taking the time to get to know the area and running the numbers frequently to understand how tides are changing. If you have a single investment property or even a variety of properties in your portfolio, it can be frustrating to do this level of market research on your own.
Contracting with an excellent property management company allows you to take advantage of all the things they've learned through the years. You gain direct access to local experience as well as an in-depth understanding of their many doors under management. Verandah Properties, for instance, sets rental rates regularly. We are adept at noticing when a subtle change in the market could mean that you want your pricing to change as well. We want to maximize your occupancy rate as well as your earnings, rather than just looking at just one narrow metric. We can find the "Goldilocks Rate" each year for your properties: not too high, not too low—just right.
We also provide our landlord-partners with the unique opportunity to minimize their risks with Landlord Protection Insurance. When you protect your investment against malicious damage and loss of rent, you further enhance the growth of your wealth through secure, passive income.
Once you've conducted your market analysis, take advantage of our FREE Make-Ready Checklist! Let's get started on the path to reaching your property's full potential together!