A rental business is considered a source of passive income. However, some property owners are full-fledged involved in this business and it is their primary mode of sustenance. Nonetheless, a rental business is always considered lucrative, provided you have mastered the art of property management. Managing investment properties is a mammoth task involving numerous considerations.
Maintenance of the property or taking reservations are not the only chores; it also involve setting up a good pricing strategy. The rent or price of your property claims number one spot to the tenants. Of course, the location, size, and amenities have a significant role, but everything comes down to pricing. Is your property worth the rent you are charging? Do you think you are receiving optimal returns?
For any tenant, the rent matters the most! So, you must set the price which is worth paying! In other words, your tenants should not hesitate to shortlist your property for its price. An ideal pricing is necessary for receiving more inquiries as you show up more in online search results.
Now, the challenging part is what the price of your rental property should be. How do you decide the rent? Let us have a detailed discussion of how Sydney property managers determine the rent of their properties. We assume you will find it an insightful read!
Principal Considerations for Setting up Rental Price
Property management can be highly profitable when you have learned the ins and outs of the business. A good property manager knows what will work best for him. This begins with determining the right rent, bringing more online traffic, and increasing the chances of generating revenue sooner.
Consider the following points while preparing your pricing strategy:
- Reason to Rent Your Property- You must consider the reason for renting out your property. If it is only an investment property meant to earn passive income then you can be more competitive while deciding upon the rent. You can experience low vacancy with higher tenant retention. But, if you have to pay a mortgage and you have to rent your property, then ensure the rent is higher than the mortgage cost, or else you will be left without any profit margin.
- Analyze the Local Rental Market- For effective luxury property management, speculating the local market is crucial. You can compare similar properties and their rent to determine what price tenants are willing to pay in that area. It will help you recognize the base price for your property.
- Check the Rental Laws in Your Area- Rental laws vary from city to country to state. It is constantly changing, and you must stay updated with the current laws so as not to violate the rental limits. Also, inquire about late fees and security deposits for a comprehensive, law-abiding pricing strategy.
- Features and Amenities- Does your property offer unique features and amenities? If yes, make a list of them. You can count on the renovations or upgrades you have done, like a modular kitchen or a Jacuzzi in the bathroom. Such features justify the high pricing of your property. If you have a swimming pool, fitness center, or laundry service, you can consider charging more.
- Management Expenses- Maintenance costs, insurance, mortgage payments, utilities, and property taxes are your monthly expenses. Calculate these to determine the minimum pricing of your property. Include the repairs or renovation expenses you have undergone. Come up with a rent that covers all these expenditures. As the role of a good property manager, you must be well aware of your operation expenses.
- Seasonality- Rental demand does not remain the same throughout the year. It fluctuates with the seasons! Generally, in most areas, summers are always at the peak, considering rental demands. However, the demand comes down during the winter. So, you can charge higher in the summer than in the colder months if the demand trend is similar in your area. Regulate your rent as per the demand.
- Ascertain the Tenant Profile- You must have a target tenant profile depending on the location, size, and amenities. So, to fix the ideal pricing for successful property management, determine the profile of your target tenant. For example, whether your property is suitable for families or young professionals. You can decide the rent accordingly. Comprehending your tenants’ profiles will provide you with an insight into the rent that will attract them.
- Unique Selling Point (USP)- What is the USP of your property? Is it located in a posh neighborhood? Does it offer beach access? Every property has some unique feature that makes them distinct. Assess your USP and market it well to attract more tenants. If you are listing your property on an online platform, highlight the USP. Once you receive responses, you will understand if it is capable of monitoring the rent!
- Seek Tenant Feedback- Before setting the price, you can exhibit your property to prospective tenants and get feedback. You can even ask how much they are willing to pay as rent. It will provide you with a fair idea about worthwhile pricing.
- Speak to a Professional- If you are still doubtful whether your rent will bring you maximum benefits, you can seek professional advice. A real estate professional can guide you through your investment decision. They are always the right person to talk to if you are new to property management.
Conclusion
Pricing of a property is the most significant factor that determines the success of your rental business. It must be reasonable yet rewarding. This is perhaps one of the most profound decisions you will ever make in your life! So, be fair and insightful!
