Determining current market value rents
Before you start your active search for a rental property, get to know the going rates for rentals in your area you’re about to look in. Get out there and visit rentals currently on the market. With one good, concentrated day of seeing 15 or 20 rentals, you’ll get a very good idea of what market rents are for your area. You’ll be able to see the discreet differences between blocks in your area and how they affect rents.
In addition, you’ll see how much more renters are currently paying for each succeeding “bump-up” in bedrooms – ie., studios compared with 1 bedrooms compared with 2 bedrooms, etc. Also, you’ll be able to see what different amenities translate into in rental prices: for example, a new kitchen or bath, a first floor versus top floor, a unit with a beautiful view, or, a unit facing a parking lot. It won’t take long for you to analyze what location, amenities and size of a unit will do for the asking rent.
The same research outlined above that you would do when evaluating properties to purchase, should also be done on a regular basis to ensure you’re continuing to ask market rents. As tenants leave and you go to look for new ones, you should routinely be going into research mode to investigate what current market rates are. If the market has slipped, and vacancy rates are trending up, you’ll most likely have to maintain, or even lower rents to attract tenants. If the rental market is good, then you’ll look to increase the rental rate you were previously getting.
Now, having done your research on market rents, try to look for properties that may have rents currently under market value that you can add value to. Obviously, you can’t change the location of a property, but you can re-do a kitchen, baths, landscaping etc. Maybe the house has been poorly kept up, and needs a new paint job, inside and out. Maybe there’s currently no on site parking for tenants and they have to park on the street – but the house has a back yard that could be converted to a parking area. Basically, the property should look inviting when you pull up to it if you want to attract the best rents. If it doesn’t, is it something you can fix? Is there enough proper lighting in the common areas of the building? If not, you can add more to make the interior areas feel safer. Always be on the lookout for ways to improve the property as you’re searching out which houses you should make an offer on.
photos courtesy of brooklyn-newyork.olx.com, bloomlegal.com, articles.ocregister.com