Reevaluating Rental Rates

There are many factors that influence the right rental rate for a home. The value of the neighborhood and the home's assessed property value may go up. Increased demand and increased maintenance costs factor into the rent you expect for a property. When property values go up, so too must the rent. So how do you reevaluate your rental rate and raise the rent based on rising housing prices?

 

Calculating Rental Rate by Home Value

Start with the 1% rule. A home's monthly rent should equal between 0.8 and 1.1% of the home's value, or around 1% as a rule of thumb. For example, a $250,000 home is likely to rent around $2,500 per month. If the home value goes up, you can re-evaluate rent based on 1% of the new value.

 

Keeping Pace with Neighborhood Rates

Don't forget to keep track of the other rental rates in the neighborhood. It's important to stay competitive, asking a comparable amount for your home without being the highest or lowest price in each housing area. Stay aware of the rental prices for other homes in your neighborhood and section of the city.

 

Rental Rate Restrictions

There may be local or building-specific restrictions on raising the rent. Become familiar with local rental laws and policies. Make sure that any current tenants are not protected from normal rental practices like fixed-rent homes. Most of the time, property owners can raise the rent as property values change, but there are sometimes legal restrictions.

 

Listing at the New Rental Rate

If property values have risen since your last tenant, you can list the new rental vacancy at the higher price. Between tenants is the easiest way to raise the rent because it bothers noones routine or planned budget. Simply spruce up the house during your usual tenant turnover process, take a new batch of flattering photos, and list at the now-higher local rental rate.

 

Raise the Rent Gradually with Existing Tenants

IF you do have current tenants, raise the rent gradually. You cannot legally change the rent amount during the term of a lease, you'll need to raise the rent when the next lease is renewed. Do not surprise your tenants with a rent increase. Warn them several months ahead of time and don't add more than $100 to the monthly rent each year. You can also write a rent increase acclimation plan for the next lease to help your tenants adapt to the increased housing expense.

 

Property values rising in your area? We can help you determine the correct new rental rate and put it into action. Contact us today to consult on your rental portfolio.

Negotiating in a Crowded Market

The real estate market is hot right now. This is good for sellers because they can list their home and have it sold within a few days or weeks. That being said, buyers are struggling with all of the competition. Many homes are getting multiple offers due to the current market, making it hard for anyone to buy a house. This is even true for those who are looking to invest in real estate. 

However, it doesn't' have to be this way. Here are some ways you can beat out others when trying to buy a home to flip. 

Be prepared to spend a little more on a house. Because there is so much competition right now, you aren't going to be able to start with a low-ball offer. You may even end up spending more than asking price to get the house that you want to invest in. 

Go for the homes that aren't in the best shape. Good homes that are priced right are the ones that are selling right away. Some of the other ones that may have some cosmetic problems (or even something a little more serious) are the only ones that are sitting around. For this reason, you may have to buy a house that needs a little bit more work, in order to get a fair price. 

Skip home inspections. If you are going to fix a house up to sell, chances are that you have your own home inspector or contractor to help you figure out what you need to do when you buy a house. For this reason, you may be able to skip the house inspections, which may just make your offer more desirable than all of the ones that won't buy a home without an inspection. 

In this market, you are going to have to be prepared to spend a little more money and buy a house that isn't in as good shape if you want to find one to invest in. You may even have to skip inspections if you are serious about winning the contract. 

 

How do I know if a Property Will Make a Good Airbnb?

 

Many people want to know if the property they are buying would make a good Airbnb property. However, just because you purchased a property doesn't mean you can start renting it out for premium Airbnb rates. There are a variety of characteristics that will make a property a lucrative Airbnb. If you understand what people want in an Airbnb, you are more likely to purchase a property that will serve your purpose as a property that demands top dollar as an Airbnb rental property.

The following are the key items that tourist say they want when they are looking for an Airbnb rental:

Choose a Popular Location:

Location is the most important factor in determining if you have a successful Airbnb rental property. You want to choose a location where people are going to be looking for a place to stay. Popular tourist and vacation destinations make a great place to purchase an Airbnb property. Near beaches or in the area where Disneyland or Disney World are located are great choices. Other hotspots like Florida or Hawaii are also great options. The most popular city for Airbnb properties in the city of San Francisco. 

Most large metropolitan areas tend to rent well and are worth your investment in an Airbnb property if it's located in the right area and near main attractions.

Offer Outdoor Spaces:

When choosing Airbnb properties, especially in warmer climates, consider purchasing a property that offers guests outdoor space to gather. Many guests will wish to spend time outside, whether they have a yard, a pool, or just a deck area where they can gather. Summer is a popular vacation time, and the outdoors are popular, especially in warmer climates like Florida or California. A property with outdoor space can be even more appealing to guests.

Consider Sleeping Arrangements:

Choosing a property that can accommodate more guests can attract larger families or groups to your property. Being able to accommodate larger groups allows you to appeal to more clients, increasing your chances of booking your Airbnb and doing more business (thus making more money on your investment).

Consider Allowing Pets:

If you are looking to rent your Airbnb out to families or parties, many will wish to bring a pet or two along to enjoy their trip. Being a pet-friendly location for cats or dogs will attract pet owners to stay at your property. Charging a small (potentially refundable) fee for pets to stay at the property with guests can help mitigate the risk you take allowing pets (who could potentially make messes) to stay at your rental.

Clean Thoroughly After Each Guest:

Be sure to clean the property thoroughly between guests. From providing fresh towels and bed linens to ensuring the kitchen and bathroom are free from signs of previous guests, clean living quarters are essential to attracting good reviews and more paying customers. The effort you put into keeping the property clean now will pay dividends (literally) in the future.

Charging a Fair Price:

Knowing the market prices for an Airbnb rental in the city where your rental is located is key. IF you charge too little, you are missing out on the profit you could make. IF you charge too much, you will lose business to other nearby properties where the prices are fairer. The prices can change seasonally, so you may need to adjust your prices throughout the year to stay profitable and competitive with surrounding properties.

Be a Considerate Host:

Accommodating the needs of your guest is critical to good reviews and repeat business. No matter how nice the property you have is, the reviews that people leave will reflect it if you are a lousy host. Being considerate as a host is as simple as responding to inquiries quickly, offering a reasonable cancellation policy, or even saying "please" and "thank you." Being accommodating to those who keep you in business can go a long way in making you a successful Airbnb investor.

Conclusion:

In the end, you want to offer a good, clean, safe place for guests to stay at a price that is affordable to the client. It's recommended to focus on larger metropolitan areas or a home near a large attraction like an amusement park or beach if you want the property to rent well.

Being a good host is just as important as offering a property in an attractive location where people want to visit. As you build more positive reviews, more people will want to stay at your rental properties.

What's the Return on Investment when Updating Option Features in Rental Homes?

As a landlord, there is a constant pull on the purse strings as to where to invest your money. While there are sometimes things that need your immediate attention, like a broken dishwasher or a leaky pipe, new renters are looking for updated amenities to help justify the rental price. If you are thinking about making your rental unit stand out to potential renters, here are two things that you can invest in and be sure to secure a good return on your investment.

Full or Partially Furnished

For new grads, or those starting over after a life-changing event, having a new place and new furnishings can help ease the transition to a big move. For long-term rentals, a furnished or partially furnished apartment can command up to 15-20% more in rent. (Short-term rentals can bring in up to 50% ). Keep in mind, this optional feature doesn't come without its lists of pros and cons. While you may have to replace items due to natural wear and tear, you can also deduct a portion of the costs from your taxes. 

In Unit Laundry

Renters are always looking for an amenity that will make their life easier. Having an in-unit laundry means not having to take your laundry elsewhere to get it done. It also saves time. According to the National Apartment Association, adding a washer and dryer unit can increase your rental income by 15%.

In 2017, the National Apartment Association produced a publication entitled, " Adding Value in the Age of Amenity Wars." This document is a great resource to help you determine if things like adding higher-end kitchen appliances are worth the investment or do ceiling fans make a difference?  It is always good to know how much of an impact a seemingly small change can make on your investment property.