A big mistake new landlords in Houston make is not taking time to learn how to calculate their property’s fair market rental rate. Because of this, so many rental property owners under- or overestimate the rent they should be charging and end up losing money every month. This is especially true as rents continue to rise across the country. Increasing your monthly rent helps you keep pace with the market, and helps you avoid leaving money on the table. When your property is occupied, however, it becomes imperative that you know how to correctly raise rents. While good advice on how to do it abounds, the primary and most important tool you have to master and use is the rental property assessment.
Fair Market Rent
The fair market rent of a property is the usual rate at which similar properties are being rented out in your area. There are no shortcuts and you need to have the specific and local numbers to calculate for the market rent since it can be very different from one neighborhood to the next.
For a Houston property, you can start by knowing what other landlords in the area are charging their tenants. You can also identify comparable properties, or comps, to ensure that you are benchmarking with similar rental properties. Some detective work is required to get this information. You can begin by checking out posted rentals in your area or the local classified ads.
Alternatively, you can contact a Houston property management company like Real Property Management Affiliates who can give you great 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 know your property’s fair market rent.
Regular Rental Property Assessment
Once you have calculated the fair market rent, the next step is to keep your rental property profitable. You have to re-calculate the fair market rent for your Houston property at least once a year to maximize your monthly cash flows. If rents in your area tend to fluctuate, you might need to recalculate more often. The shortage of single-family rental homes has caused a surge in rental rates in most markets across the country. If you have not assessed your rental property recently, you might be charging too low and missing out on monthly income opportunities.
But it’s not only about the money. Property owners have various reasons for not raising their rent. Some are worried that higher rent will make the rental property harder to lease. Other landlords fear that setting the rent at the going rate will make their rental house less competitive, leading to fewer tenants. Or they might not want to anger a current tenant who has been renting from them for a while. Still, if you have not changed your rents for a few years, your current tenant could be paying way below the rental rate everyone else is 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 after extensive market research, you might still be concerned about raising your rent without getting on your tenant’s bad side. This is where a professional property management company can help by assessing your property and setting your rental rate. The cost of hiring a property manager hinders many landlords. But, considering that you are not charging the right amount of rent, you are actually already losing more money than you would pay someone to manage your property for you. From ensuring you have an accurate rental rate to working amicably with your tenants, a professional property management company can help increase your monthly income, effectively paying for itself.
Would you like to know more about what a professional property management company has to offer? Contact us online today or give us a call at 713-539-5765.
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