When investing in a rental property, it is essential to know and understand that there is a lot that goes along with it. Property upkeep and preventative maintenance are vital. Always be sure to have funds set aside in the event of an emergency. I have worked with several homeowners who used their rental income to pay the mortgage payment without setting any funds aside. When an emergency maintenance situation arose, they had no funds to cover the cost of the repairs. -+++You should also consider the fact that there may be a time of vacancy, so you must have the funds to cover the mortgage, utilities, and other bills during that time.
When providing rental comps for the property, we generally use the information that is provided in the MLS. It is much like pulling the sales comps for a property. However, what one must understand is sales are a little different than rentals when it comes to the pricing with upgrades, etc. If there are several other rental properties in the area which are comparable to the property you are planning on listing for rent, you should always consider asking for a similar rent amount regardless of the upgrades. Since most tenants are not planning on staying forever, and they know that the home does not belong to them, many of them consider price over upgrades or anything else. Your property may, though, rent quicker than another house if it does have some upgraded features. After all, wouldn’t you rather rent the home next door for the same amount if it was better than the one you were originally considering?
If your property has a swimming pool, most rental companies will require the owner to maintain it since it can be extremely costly if not taken care of properly. In that situation, we generally recommend increasing the rent amount by $100.00 – $150.00/month, which would include the cost of the pool service. This is the same with landscape services if you have a lot of greenery. I have seen many situations where a tenant was left to maintain the landscaping, and when they vacated, the grass and shrubs were dead. The cost to replace the dead landscaping exceeded the amount of the security deposit, leaving the owner to pay the difference and/or collect it from the tenant in small claims court.
I have also found that if a property sits vacant for more than a few weeks with little to no activity, it is probably listed for too high of a rental rate. If that is the case, it is best to consider decreasing the rent amount sooner than later. In the long run, it will be more cost-effective. For example, if you have a property that is vacant for two months and you are covering the mortgage, utilities and all other expenses during the time of vacancy, calculate the monthly rent amount requested for the time it has been vacant and divide that amount by 12 months – the most common lease term. If the asking rent is $1,500.00/ month and the property has been vacant for two months, that would amount to $3,000.00 or $250/month in lost rent over 12 months. Therefore, had you listed the property for $200.00 less per month ($1,300.00), it probably would have rented expeditiously, and you would have saved more and lost less money in the long run. Make sense?
I hope you find this information to be helpful. If you have any property management questions, or if there is anything that you would like me to discuss in my next article, please email me at email@example.com.