The Cornerstone of Maximizing Rental Income and Minimizing Operating Costs Comes Down to One Idea
It is an error to try and price your rental property at the highest possible rent the market can bear. It seems like that SHOULD be the strategy but in this article, we will discuss the problems with such an approach.
Anyone with any business savvy knows that winning a new customer is much harder than keeping a good one. The good customer who has spent money with you and knows your offerings is much more likely to continue buying from you IF you provide what they want. Very simple!
Turnover is much more costly than people realize. Retaining your quality tenants will give you the best returns.
If you find a great tenant, you keep them by making it hard for them to leave. There are certain things you can’t change like the location of the property or an irritating neighbor, but what you have total control over is the monthly rent and your approach to maintenance and repairs.
When tenants get restless and begin to casually look online for a new place to live, the monthly rent is the number one factor. You want to price your rental so the tenant always feels they are getting a good deal. Of course we all think the grass is greener elsewhere. Seems to be human nature. But quality tenants tend to be practical. Moving sucks. We all know it. So before we decide its time to move on, things have to reach a certain threshold of ‘pain’ at our current residence.
Don’t make your rental amount contribute to the tenant’s pain. Keep in mind the idea that you want tenants who, when looking for other options, are reminded that they are in fact getting a deal living in your property. If they leave, you’ll have to do some very basic maintenance (patch and paint, aesthetic touch ups so the home shows well, etc). That costs money.
Then there’s the issue of finding new tenants. Going through that process though technically not expensive if done without a property manager (not recommended!)
may result in missed months of rental income. One month without rent hurts. And if you are using a property manager, you likely have to give up close to a full month’s rent for the service the manager provides to fill your place with new people.
Learning how to price your rent just a hair below market value is an art that pays off
The unknown can be problematic meaning new tenants may bring issues you don’t currently have. Of course, the expert screening process at James Island Property Management eliminates this issue for the most part. But what you want is quality, responsible people renewing year after year. When this is the case, you can fix things while still earning rent.
The other big factor in keeping the quality tenants is creating an atmosphere that demonstrates you very much care about the state of the home. You care because you own a valuable asset that is appreciating. And also you care that your tenants have a place to live where they feel happy, safe and peaceful.
In conclusion, you’ll make the most money by A) Pricing your rent just a hair below market value B) Finding a great tenants. (That’s our specialty) C) Creating an easy way for great tenants to renew for multiple years by taking great care of the home
Here’s a bonus secret…
Be flexible. Tenants pay the rent and essentially it is a business transaction. We get that. Reasonable behavior on all sides keeps the peace and the rent flows, the maintenance is done and all is well. But once you’ve been doing this a long time, you realize situations come up that require flexibility. Helping tenants out with their reasonable demands is another way you keep them. You want to be the cool landlord. Just don’t try hard to be their friend. That’s potentially a problem… but for another article.