Determining market rents in Franklin County shouldn’t be a puzzle, but for many people, it feels like they’re on the hunt for an elusive piece they need to create the perfect picture. And because they fear they might be missing something the entire process becomes more overwhelming than it needs to be.
Setting market rents shouldn’t be tough and it shouldn’t feel like a puzzle. In fact, the missing piece(s) are always right in front of you. All you have to do is look at the market. In this post, we’ll explain the importance of setting accurate market rent rates and how to strategically go about doing it.
Why Setting Accurate Market Rents is Key to Your Investment Strategy
There’s a lot at stake when it comes to setting your rental rates. After all, what you charge for rent has a big influence on the type of tenants you will attract as well as the NOI you generate from your investment. What’s more, you can’t change rent rates once a tenant signs a lease.
Because net operating income is a calculation of income minus expenses, the more you can increase your revenue by setting competitive rent rates, the better for your bottom line (for more about improving your property’s NOI, read this article.
Below we break down what you need to know as you determine the right rent rate for your Columbus investment property.
What to Know When Determining Market Rents
Assessing market rent is primarily about the numbers, but there are some intangibles you should also consider. First, let’s talk numbers.
To set your rent, the first thing you should do is look at current listings. The marketplace dictates supply and demand, and supply and demand dictates what you can charge for rent.
Once you find the current listings, from there you can do a market rental analysis of the comps in the area and come up with a price that makes sense for your property.
A Point of Caution When Setting Rent Rates
At this point, you know the hard numbers. Perhaps you may feel tempted to nudge your rates up even higher to secure “good” tenants. Don’t. Contrary to what you might intuitively think, setting your rent at a fair market price or even slightly below is what’s needed to get the high-quality applicants you’re looking for.
Discerning, high-quality tenants are going to pay the absolute minimum rent for a high-quality space that fits their budget and needs. They’re shopping around, they’re getting to know the market, and they have no intention of paying more for a property when they can get a similar one for less down the block.
On the other hand, the people who are willing to pay more can become bad tenants. These are the people who may have a criminal history or an eviction on their record, and 90 percent of landlords won’t rent to them at all. They may be willing to pay almost whatever it takes just to sign a lease and be done with it. It’s nearly certain that if you’re asking way above the market rate, you risk only getting bad applications because the discerning tenants won’t pay a penny more than the market rate.
Setting your rent rates fairly and in line with market conditions improves your likelihood of securing quality tenants who are more likely to stick around because they trust that they’re paying a fair price.
To learn more about owning rental property in Central Ohio, get in touch with us at RL Property Management. We’ve been professionally managing rental properties in the greater Franklin County area for more than a decade and have the expertise and professionalism to help you get the most out of your strategic investment.