Rental rates can sometimes seem like a mystery. What’s the right rent for your property?
The mystery is mostly due to the fact that the market changes so quickly. The rental value of your property today is not the same as it was 10 months ago or two years ago.
Establishing the correct rental value is an important part of the leasing process because it helps you find a great resident and minimize the vacancy time for your South Bay rental property. We’re often asked by landlords how much they can earn on their properties, and we always want to help with accurate rental properties. Ultimately, the amount of rent you can charge depends on a number of factors, including:
- Market strength and competition.
- Property condition.
- Location.
We can understand the inclination many landlords have to charge as much as possible. You don’t want to leave money on the table. You don’t want to find yourself underpricing your property. However, overpricing your home can lead to longer and more expensive vacancies. You’ll need to study the market and the properties similar to yours. See what they’ve rented for recently.
Here is our take on rental values and how you should approach pricing.
Educate Yourself on the South Bay Rental Market
Before you even think about what you want to earn in rent, you have to take a look at what similar properties are renting for. You need to know whether the market is full of renters or full of rental homes. Where is the demand? This will help you attach a fair rental price to your property. It’s essential to know how the market is currently performing.
A lot of rental property owners will have a firm idea of what they expect to earn or want to earn. They will expect to earn at least as much as they need to cover their mortgage payment, their insurance, and their property taxes. They’ll want to set rent high enough that they can earn some positive cash flow right out of the gate.
That’s not always possible, nor is it consistent with what the market will demand. When we are pricing a rental home, we have to follow the market. If the home is not fairly priced, there will not be any residents interested in renting it.
Access Trustworthy Data When Establishing a Rental Rate
Local expertise is important when you’re evaluating the market. Consult with a South Bay property manager who studies the market daily and is aware of the latest pricing and tenant trends.
Good property managers invest heavily in technology. This leads us to a lot of data that can be used to correctly price your property. When you’re working with reliable data, you’ll save time, avoid long vacancies, and attract a well-qualified renter. Don’t rely on the rental values you find on Craigslist or Zillow. You can do better. Property management insights and data analytics will allow you to get into specific neighborhoods and measure your property against others on the market.
A good management company can also provide a comparative market analysis. This will give you an idea of what homes similar to yours are renting for in your specific South Bay neighborhood.
Location, Location, Location
Certainly, you know that location matters when we’re talking about real estate. It impacts the value of your rental real estate, too. A fair rental price can push a little higher when your rental property location includes a good school district, streets that are easy to travel, and proximity to grocery stores and other conveniences like parks, dining, shopping, and entertainment.
If your rental property is in a remote location that’s difficult to find or close to a highly commercial or industrial neighborhood, you might have to lower your price a bit in order to attract good tenants.
Property Condition: A Pricing Factor Owners Can Control
We’ve talked about market strength and location. Those are things you cannot necessarily control.
However, you can control property condition. This is where you can have the largest impact on your rental value.
Well-maintained homes are always going to bring in more rent than homes that are old, deteriorating, and in need of constant repairs. Tenants don’t want to live in a property where the walls have peeling paint and the appliances are 30 years old.
If you want to provide a fair price that’s a little higher than the market averages, make some strategic upgrades and updates that are likely to get the attention of good tenants. You’ll have to invest a bit of money, but when you choose cost-effective upgrades, you’ll earn back everything you spend by attaching a higher rental price tag to your home.
Rental rates run higher when your property has:
- Fresh paint on the inside and the outside. Don’t forget to check the condition of your exterior paint.
- New floors. Tear up the carpet and consider putting in hard surface flooring, at least in the common areas. You don’t have to splurge on hardwoods. Faux wood, laminate, tile, and even vinyl that’s good quality can look great.
- Better lighting.
- New hardware, including faucets, drawer pulls, shower curtain rods, and mirrors.
- Pretty landscaping and a welcoming curb appeal.
Keep these upgrades and updates low-maintenance and affordable. It will make a difference in what you’re able to charge in rent. You’ll remain competitive in the local rental market, and your home will be what sets the standard for other properties.
Rent Control and South Bay Property Pricing
Let’s talk about rent control and how that plays into your rental rates.
When you’re renting out a single-family home in the South County or a multi-family unit in a newer building, you’re likely exempt from the statewide rent control laws that went into effect in 2020. However, rent control will impact how you set your own rental price.
With inflation pushing rents higher, even rent-controlled properties have been raising rents by 10 percent.
This climb in rental rates has more or less peaked, and you probably cannot continue to raise rents by as much in the current market. But, you should still strategize around how you’ll manage a lease renewal and the corresponding rental increase.
We can help with all of your pricing and property management needs. Please contact us at South County Property Management. We serve Santa Clara County and South County, including San Jose, Campbell, Saratoga, Cupertino, Sunnyvale, Los Gatos, Milpitas, Morgan Hill, Gilroy, and neighboring areas.
