One of the major mistakes a new landlord in Ellsworth makes is not learning how to correctly calculate a fair market rental rate for his property. This results in many rental property owners over-or undercharging rent and losing money each month. This is especially true as rents continue to rise across the country. If you don’t want to leave money on the table, you have to increase your monthly rent to keep up with the market. Of course, the knowledge of how to raise rents correctly is very important especially when your property is occupied. While there is a lot of good advice on the right way to do it, the first and most vital tool you need to learn about and use is the rental property assessment.
Fair Market Rent
A property’s fair market rent is the rate similar properties are being rented out for in a specific area. The market rent differs from one neighborhood to the next so you really need specific and local numbers to calculate your own correctly.
For an Ellsworth property, you can start by knowing what other landlords in the area are charging their tenants. You also have to look at comps, or comparable properties, to ensure that the rental properties you have identified are similar in features to yours. Some detective work is required to get this information. Posted rentals and local classified ads are good places to start.
Alternatively, you can contact an Ellsworth property management company like Real Property Management Acadia 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. This would be the fair market rent for your property.
Regular Rental Property Assessment
After calculating the fair market rent, you now have to do the next step to keep your rental property profitable. It is important that you re-calculate the fair market rent for your Ellsworth property at least once a year, or more frequently if rents tend to change quickly. This will help maximize your monthly cash flows. The recent shortage of single-family rental homes has caused rental rates in many markets to skyrocket. If you have not conducted a recent rental property assessment in your area, your rent charges are likely too low.
But it’s not only about the money. Property owners may be hesitant to raise their rent for a lot of different reasons. Some are worried that higher rent will make the rental property harder to lease. Still, other landlords are afraid to set their rent at the going rate thinking their rental house won’t be competitive, and they’ll have trouble finding tenants. Or you might be concerned about getting on the bad side of a current tenant, especially when they have been renting from you for some time. But, if your rents have not been updated for a few years, it is very likely that your current tenant is paying a rental rate much lower than the usual rate other tenants are paying.
Professional Property Management Pays for Itself
Knowing if you are charging the correct amount in rent or not can be time-consuming and nerve-wracking. Even after having done your own market research, you could still be concerned about losing your tenant if you raise your rent. Having a professional property management company assess your property and set your rental rate can be very helpful. Landlords often forego hiring a property manager thinking it is costly. But if you are not charging the right amount of rent, you might already be losing more money than if you were paying someone to manage your property for you. Professional property management companies can help you increase your monthly income, and in that way pay for itself, by ensuring you have an accurate rental rate and by maintaining a good relationship with your tenants.
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 207-561-7482.
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