The price of your rental property can make or break your success as a landlord. You want to turn a profit, but you also have to listen to the market. So, how do you zero in on the right number? How difficult will it be to find a tenant? How much should you consider location, population, condition, and demand?
It’s actually very simple. Whatever type of property you have, and wherever it’s located (Fort Worth, Dallas, or a small outlying town), renting your property comes down to two factors: price and condition.
Higher is not always better. We know we’ve found the right price when we have regular showings. If we have limited to no showings, we’re overpriced. We want to average at least one showing every other day to validate the price on the market. If we have a showing every day, we’re on point and the property will lease pretty quickly.
Check the Condition of Your Property
The condition of the property needs to meet people’s expectations. If you have 5-7 people coming in the first week, you know your price is right. However, if no one applies, there’s an issue with the condition.
If someone books a showing after seeing pictures online, but then finds stained carpets, mismatched paint, a dirty kitchen, or a moldy bathroom when they tour, they won’t apply. People want to live in a clean place, and if they’re moving from out of state, they don’t want to have to clean when they arrive.
Price AND Condition are Key
Notice: it’s not Price vs. Condition. Both qualities factor into the rentability of your property. Also, notice we didn’t directly address location. Sure, location matters in some sense, but if you’re priced right, you’ll get showings. If your property is in good condition, you’re more likely to get a quick lease.
Remember, no qualified tenant will move into a property that needs work, mostly because they don’t have too. If they’re qualified, they can pick and choose where they live.
A tenant who would apply for a property that isn’t in great financial shape, in most cases is hoping that the landlord will overlook the bumps and bruises on their credit/rental history.
They’re hoping if they overlook a poorly prepared property, we’ll overlook their poor credit. Not the case.
We’ve leased houses in small cities with a population less than 5,000. We’ve also leased in Fort Worth with a million people. You can rent a property just as fast in a small town as the a big city if the price and conditions are right.
How to Price Your Rental Property
Use the MLS to run a Comparable Market Analysis on your property. Check the lease amounts for nearby properties so you set your price right. Websites like Zillow and Trulia aren’t reliable for gauging the comparables because these estimates can be easily manipulated. MLS, however, shows exact lease numbers entered by trusted real estate agents.
Also, talk with a property manager you trust to find the right price point. Then, trust their expertise. Overpricing by even $100 can keep you from attracting tenants, and the longer you refuse to lower, the longer you’ll go without collecting rent.
We previously had a client who wanted to price his house at $1,500, based on his Zillow findings. Based on MLS, we told him his property was in the $1,200-$1,300 range. But he had a great property and wanted to aim high, so we listed at $1,500.
We had no showings the first week. On day 8, we lowered to $1,395 (still $100 high). Again, we went another week without showings. On day 15, he dropped the price to the recommended $1,295. We had 10 showings that week and leased it within 7 days.
The condition was great all along, but the price had to align with market value. Unfortunately, because it took 2 extra weeks to rent the property, he lost $650 in rent.
How Long Will It Take?
How long does it really take to rent out a property? If you have the right price on a property in good condition, you’ll rent quickly.
If you rent the property yourself, it can take upwards of 2-3 months. Most landlords have jobs and have limited time to prep and show the property, run background checks, market the property etc. If you work with a property manager that uses their marketing tools and has access to the MLS like we do at Leap, it takes an average of 16 days if priced accordingly.
Have questions about pricing your rental property? Get a free analysis by filling out the “What Will My Property Rent For?” Form on the top right and we’ll help you find your properties perfect price point free!