Is your real estate investment earning everything it should? Or, are you leaving money on the table every month when the rent comes in?
Worse, are you leaving your property vacant for longer than necessary because your rent is priced too high?
Let’s talk about pricing your Sonoma County rental property, and what you can do to maximize your rental income.
You might think that in order to earn more, you have to charge more. It sounds simple enough. And, sometimes this is true. We have come across more than a few properties that were not asking enough in rent. That can be dangerous because it not only curbs what you’re earning right now, it also makes things harder for you when it’s time to raise the rent. You might struggle for a long time to bring those rents up to where they should be.
There are also the property owners who are fiercely protective about what they think they should charge. But if you charge too much, you’re likely to face a longer vacancy period. That’s expensive. You might find yourself approving a tenant who isn’t qualified because they’re the only applicant willing to pay your too-high rent and possibly end up with future rent collection problems
The rental value that you establish has to be profitable. However, it also has to be competitive and aligned with the current market. Sonoma County is well-known for its high rents. With the way rents have gone up over the last few years, you should be at a pretty comfortable price point.
But, your costs have gone up, too. Maintenance is much more expensive than it once was. Your insurance premiums and your property taxes are likely higher. You need to keep raising the rent year after year in order to keep up with your own costs and to make money.
To maximize what you earn and ensure you find and retain a great resident, you’ll want to set the right rent price, and you’ll be strategic about rental increases when it’s time for the annual rent increases.
Establishing the rent for your investment property is not just a decision that determines how much revenue you collect. It also affects the demand for your property and the quality of your tenants. Knowing how to set the right rent price will keep you profitable, attract the right tenants, and boost property value.
Here are some strategies for setting the right price.
Start with Research and Comparable Market Analytics
The best place to start is with an examination of the local Sonoma rental market. Before pricing your own rental property, it is essential to know what’s happening out there. Understanding the average price for similar properties in your target area is important, but you want to go even beyond that. Find out how long it’s taking those homes to rent. Look at what they’re offering; are there stainless appliances , garage, storage, location etc….That will impact how you price your own property as much as what the rental value is for the homes you’re using as comparison.
Geography is important. Sonoma County covers more than 1,500 square miles and is populated by nearly half a million people. You want to look at specific neighborhoods when you’re looking for comparable rental prices. As property managers, we conduct our analysis based on zip code. You’ll find that rental values and rental housing demand change from area to area, and you want to be sure you’re accessing data that’s reliable, hyper-local, and specific to where your investment is located.
It might seem easy enough to hop online and see what the rents look like on sites such as Zillow, Craig’s List or Zumper. This is one way to get started, but remember your target tenant market. And, remember that to effectively price your property and maximize what you earn, you need the best and most recent data possible. You won’t get that from Zillow. You will get that from a local Sonoma County property manager, and what is currently rented.
Evaluate all factors when you’re comparing your property to others, such as location, size, condition, and amenities offered. If your research reveals that the rental price you were thinking of attaching to your home is too high compared to similar properties in your area, you may need to reconsider your pricing strategy to remain competitive. If the price you were thinking seems too low, go ahead and raise it when you begin your marketing. If you’re getting a lot of attention and interest at the higher price, you’ll know you were right to raise it. If you’re not getting any interest at all, you can be sure your price is too high.
How to Calculate Your Own Sonoma County Rental Value
Once you have completed an analysis of what the rents in your specific neighborhood look like, you’ll want to maximize your own income by thinking about your specific property. Your rental value is influenced by several factors, including:
- Property location
- Property age
- Square footage
- Number of bedrooms and bathrooms
- Condition of the property
- Special amenities and upgrades
There are a lot different ways to calculate what your rental value is, and some of them are more reliable than others. Some property owners will use complicated equations to set a rental value that they feel is accurate. Use whatever formulas and math will help you. However, what you have to remember is that the only way to maximize what you earn is to remain competitive even while you’re working towards being profitable. Think about the comparable rental prices in the market, the competing properties your desired tenants are looking at, and the number of days you’re willing to have a vacant property.
Maximizing Your Rental Income: When to Raise Your Rents
You’re in a strong position when you know that your property is worth more than others on the market.
If your rental property has specific perks and features, your rental home deserves a higher rental price. Tenants are getting more value when they live there.
Some of the unique features that can influence rent prices include:
- Outside space
- Fenced yards
- Parking, specifically attached garages
- Extra storage space
- Appliances such as in-unit washers and dryers
- Energy efficiency and sustainable features
- Upgrades and updates like stainless appliances and hardwood floors
- Heat Source
- Accessibility
- Privacy
- views
You can also offer additional services such as landscaping, cable, or internet services to make your rental property more attractive to tenants and more expensive to rent. By highlighting the unique features of your rental property, you can justify an increase in rent price and attract high-quality tenants.
Allowing pets is another good reason to raise your rent. Sonoma County tenants moving in with dogs and cats will be willing to pay pet rent in order to live with their furry family members.
How to Raise the Rent at Renewal Time
You may think that pricing your rental property is just something you do when you list it. That’s not entirely true; pricing is an ongoing process.
Over time, the market shifts and tenant demands change, and you may need to adjust your rent price accordingly to ensure that you continue to maximize rental income.
As the market becomes more competitive during a tenancy, you’ll want to raise your rent when it’s time for the tenant to renew their lease. Be careful of any limits that may be imposed when your property is covered by the rent stabilization laws in place, {check with the local county, and state tenant protection laws} and always make sure you can document your reason for the increase before you present the new amount to your tenant.
There are very few tenants in Sonoma County who are surprised when their rent goes up every year. It’s expected. However, you want to remain competitive in order to retain the fantastic residents who are paying rent on time, taking care of your property, and fulfilling the requirements of their lease agreement. To maximize what you earn, you’ll avoid turnover and vacancy costs that can become expensive.
Setting the right rent for your Sonoma County investment property is a big deal. You want to get it right not only for your own profitability, but also so that you can attract and retain the best possible residents.
Experienced Sonoma County property managers, D & G Equity Management serves area landlords and real estate investors with furnished or unfurnished single-family homes, multi-unit properties and commercial units throughout the Sonoma County area. Our comprehensive property management services ensure your rental properties are safe, compliant, and well-maintained, providing peace of mind for landlords, and a positive living experience for tenants.
Ensuring your Sonoma County rental property is priced correctly and regularly reviewed will help you maximize your investment returns. A proactive approach, backed by local market knowledge and professional property management, will keep your rental property competitive and profitable. Contact us at D & G Equity Management for expert guidance on setting and adjusting rental prices to meet your financial goals.
By prioritizing the right rent pricing strategies, you can enhance your property’s appeal, attract high-quality tenants, and maintain a steady and lucrative rental income stream. Trust our expertise to navigate the complexities of the Sonoma County rental market and help you achieve long-term success with your investment property.
