One major mistake that new landlords make is to forego learning how to calculate a fair market rental rate for their property. This is the reason why a lot of property owners are losing money monthly by under- or overestimating how much rent to ask for. This is especially true as rents continue to rise across the country. If you do not increase your monthly rent to keep up with the market, you are making an unsound decision. Knowing how to correctly raise rents is equally important, especially when your property is occupied. While there is a lot of good advice on the right way to do it, the first and most vital tool you need to learn about and use is the rental property assessment.
Fair Market Rent
The usual rental rate at which a similar property in your area is going for is called the fair market rent. This value varies from one neighborhood to the next so you really need specific and local numbers to calculate the market rent correctly.
You can figure out an Aurora property’s rate by knowing what other landlords in your area are charging their tenants. You can also identify comparable properties, or comps, to ensure that you are benchmarking with similar rental properties. You need some investigation to get this information. You can start with posted rentals around your area and ads in local classifieds.
You can also contact an Aurora property management company like Real Property Management DuPage Preferred for a ton of information about the rental market. When you have at least three comps, calculate the average monthly rent and compare your current rate with the result. You now have the fair market rent for your property.
Regular Rental Property Assessment
Calculating the fair market rent is an essential step, it is just the first step in ensuring your rental property is profitable. It is important that you re-calculate the fair market rent for your Aurora property at least once a year, or more frequently if rents tend to change quickly. This will help maximize your monthly cash flows. The shortage of single-family rental homes is driving the soaring rental rates in markets all over the country. You might be charging a lower rent, especially if you have not recently done a rental property assessment, causing you to miss out on additional monthly income.
Still, it’s not just about money. Property owners hesitate to raise their rent for many other reasons. Some are worried that higher rent will make the rental property harder to lease. Still, other landlords are afraid to set their rent at the going rate thinking their rental house won’t be competitive, and they’ll have trouble finding tenants. Still, others do not want to risk angering a current tenant who could have been renting for a good while. But, if your rents have not been updated for a few years, it is very likely that your current tenant is paying a rental rate much lower than the usual rate other tenants are paying.
Professional Property Management Pays for Itself
It can be time-consuming and a bit nerve-wracking to figure out if you are charging the correct amount in rent or not. Even with a lot of market research, you might still hesitate to raise your rent for fear of losing your tenant. Hence, having a professional property management company assess your property and set your rental rate could be your best option. Some landlords balk at the cost of hiring a property manager. But compared to the money you are losing from not charging the right amount of rent, paying someone to manage your property might not be so expensive after all. By giving you accurate rental rates and working pleasantly with your tenants, a professional property management company can help you increase your monthly income, therefore paying for itself.
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