Rental prices are up compared to this time last year. So, is this the perfect time to make a massive profit from your property investment?
Perhaps, but first, you need to get your rental valuation right.
If you get it wrong, you could leave money on the table. Alternatively, you could end up with an unoccupied property. To help you set the perfect rate, we've debunked some common myths about rental property pricing in Nashville.
Myth: Set Your Rent as High as Possible
There is an assumption that you can keep raising your rental price indefinitely until you no longer get a paying tenant at that rate.
While this sounds like it might work, it's not correct. Nor is it practical. The market determines the price. So, you need to begin with some market research.
Only then can you set your upper rate. That approach will prevent your rental from staying vacant for longer than necessary. Plus, you won't waste money paying for a rental listing at a price that won't win any viewings.
Myth: Rental Valuation Is Costs Plus Profit
One tip you might hear is to use a simple formula to calculate your rental rate. This calculation adds up all your monthly rental costs, including your mortgage, and adds a percentage on top for profit.
It seems like an attractive method because it guarantees you'll see a profit. However, this calculation doesn't work in the rental market. Only demand can set prices, and your rental expenses won't shape that demand.
To calculate your valuation, you need to look at the demand in your area. You should also examine trends and the potential for future rises or falls in demand.
Myth: Your Property's Interior Determines Your Rental Valuation
If you walk into a stunning property with a top-of-the-range kitchen and bathroom, you may assume it commands a sky-high rental rate. That could be the case, but it oversimplifies things.
The property condition is a helpful way to wow a potential tenant and get them to sign on the dotted line. But it's not the sole driving force behind a rental valuation.
Tenants value other aspects, too. Location is essential, for example.
If you are marketing to young professionals, they may prefer a property near bars and restaurants. Families may want a home near good schools. Other people might desire private parking or easy commutes.
You must look at your target demographic and their priorities before determining your rental valuation.
Myth: Once You Set Your Price, It's Fixed
Landlords may worry that by setting their property rental rate too low, they could miss out on future market changes. While raising your rates after a tenant has moved in is not ideal, it's possible.
When and by how much you can adjust the rate will depend on your lease agreement. So, make sure your legal paperwork gives you flexibility.
Getting Your Rental Valuation Right
Take your time with your rental valuation and avoid myths about how to price your property. Those assumptions could leave you missing out on the long-term profit potential.
You can also get expert help from a Nashville rental management team with experience in pricing properties. PMI Music City offers a free rental analysis. Enter your property address here to begin.
