Being a landlord can be a pathway to financial success. You may be able to build up your savings, diversify your investment portfolio, and even grow wealth over time through rising property prices. But buying an investment property is only half the battle. To successfully complete the other half, you’ll need to price your Austin home correctly.
Pricing the rental correctly will benefit you in two main ways. One, you’ll be able to maximize your return on investment. And two, you’ll be able to keep your property competitive in the rental market.
Without prior experience as a landlord, this can prove to be a daunting task. That’s why Austin property owners usually go with professional property managers. A good property manager will have tried and tested processes or strategies to help a landlord price their home correctly. If you need help pricing your rental, we have put together some tips to help you get started!
Examine The Competition
When starting out as a landlord, this is probably the best way to get an idea of the market. Look at what the competition is charging to get a basic idea of what to expect. It goes without saying that you should only focus on comparable properties .
Comparable properties are properties that share the same characteristics as your Austin home. For example, share the same location, amenities, square footage, and number of bedrooms and bathrooms.
You can search for comparables in a number of ways. You can begin by going online to sites like Trulia and Zillow. Next, you’ll want to search for properties in your location and apply the appropriate filters.
Another way to search for comparables is to do it yourself in person. Interview various landlords renting out similar properties and ask them how much they are charging their rentals. You may also want to learn about the vacancy rates in the area.
Seeking professional help from a qualified real estate agent or a property management company will be beneficial. These professionals will have insider knowledge on everything you may need to know about the local rental market.
Consider The Amenities
Different homes will usually have access to different amenities. And the more desirable property amenities, the more the demand from tenants. Demand drives rental prices!
The following is a list of some amenities that are popular with tenants.
- Security measures such as security cameras, on-site security staff, and carded community entry.
- Availability of dependable internet access.
- Onsite secure parking.
- An updated kitchen.
- A private outdoor space.
- In-unit appliances
- A pet-friendly rental.
Do The Math
No one wants to lose money on their investment. Therefore, before pricing your Austin home, make sure to understand and factor in all the potential expenses. The following are some of the costs associated with running a rental home.
- Utility fees
- Maintenance fees
- Homeowners insurance
- Vacancy costs
- Property taxes
- Landlord insurance premiums
- Auto and travel if you commute to your rental
- Depreciation expense
- Landlord software fees
- Mortgage interest
- Property management fees
To estimate how much you need to set aside for annual upkeep, you may want to consider the 1% Rule. Simply put, this formula states that a landlord should expect the annual maintenance costs to be 1% of the total home purchase price. If, for instance, you buy a property for $200,000, then you should roughly expect the annual maintenance costs to be about $2000.
You can also use the Square Footage Formula. This one estimates that the annual maintenance cost will roughly equal the square footage of the home. Suppose, for instance, that your Austin home is 2,000 square foot. According to the formula, annual maintenance costs may cost $2000.
Keep in mind, these are only estimations. Maintenance costs can also vary depending on things like the property’s age, and condition of major systems.
Learn The Market Demand
Your goal should be to invest in an area where rental demand is high. This will be an assurance of high occupancy rates for your Austin rental home. One of the first telltale signs of market demand is the number of inquiries you get after advertising the home for rent.
If you’ve done everything right, you should be able to get a decent number of inquiries from prospects. However, if there are little to no calls, either of two things may be true.
One, is that you have overpriced your property and that has made it unattractive to prospects. Or two, your rental marketing strategy was simply ineffective. In such a case, your best interest would be to simply hire a professional property manager.
Hire A Property Management Company
Are you just starting out as a landlord? Have you been renting out your Austin home but are experiencing long vacancies? Or could you be an out-of-state investor and don’t really understand how the Austin rental market operates?
Whatever problem you may be experiencing, a good property manager can help. Experienced property managers understand the ins and outs of the local rental business. After all, they manage rental properties 24 hours a day, 7 days a week.
They can help you not only price your Austin home correctly, but also manage it reliably and professionally. And while hiring a property manager may seem like just an additional expense, they are worth their weight in gold.
Bottom Line
With these tips and possibly some help from a property management company, you should be able to set an ideal price for your rental property. For expert help, contact Rollingwood Management Inc. We’ve been successfully managing Austin rental properties since 1986. Get in touch to learn more!