Deciding on a rental value for your Los Angeles investment property is more complicated than ever. You have a lot to think about, including the market, the competition, whether rent control impacts your price, and your long term return on investment (ROI).
Proper pricing will involve a lot of number crunching. It will involve some good data, which you can usually get from a local Los Angeles property management company. You’ll need to take the temperature of the market. What are homes like yours renting for right now? Are there a lot of them? How long does it take for them to move from listed to leased?
You never want to underprice your California home, because that will mean less monthly rental income for you. It will also be nearly impossible to catch up with market rents, especially if rent control is an issue for you. You don’t want to charge too much, either. If you do, you’ll have a hard time renting it quickly to good residents. A longer vacancy period is a lot more expensive than a lower rental price.
Ideally, you’ll land on a rental price that’s both profitable and competitive. Let’s take a look at what you need to think about when you’re deciding how much rent you can get for your Los Angeles property.
Los Angeles Rental Market and Its Impact on Price
Pricing your home correctly requires you to study the Los Angeles market and to know what kind of prices it will tolerate. Perhaps you want to earn $3,000 a month in rent because that amount will cover your mortgage and your taxes and insurance, while still providing some monthly income. But, if homes similar to yours are renting for $2,700 per month, your price will only leave you with an expensive vacancy or an undesirable tenant.
You need to follow what’s happening in Los Angeles. Pay attention to market conditions and the rental landscape. When rental property inventory is low and demand for them is high, you have a little flexibility with your pricing, because tenants will be competing for the best homes. But, when there is a lot of competition on the market, and plenty of homes for tenants to choose from, you’re going to need to really crunch those numbers and arrive at a price that will both attract tenants and ensure you’re not losing money on your investment.
Prioritize learning more about the market. Los Angeles property managers are good at following trends and analyzing data. No one is better positioned to price a home correctly.
Location and Condition in Property Pricing
The performance of the current Los Angeles rental market is beyond your control. But, you can control how your property looks. Increase your rental value with improvements and updates. Remember the things that matter most; fresh paint, updated appliances, clean floors, and attractive landscaping.
You don’t have to be a real estate expert to know that location is crucial.
A rental property in a good school district will easily attract higher rents and more demand from families with children. If your home is close to public transportation or popular commuter routes, you can charge more than a similar home in a remote area. Spotlight your location in your marketing and advertising, especially if your price is a little higher than similar properties in less appealing neighborhoods.
Every tenant in Los Angeles will have different size requirements. If you’re renting out a unit in downtown Los Angeles, a studio will be priced differently than a three-bedroom penthouse. In suburban communities, renters will be looking for single family homes with at least three bedrooms and two bathrooms. Those are the homes that can be priced well. In the city, apartments and condos don’t need to be huge, but they do need great amenities and modern updates if they want to bring in top dollar.
Maintenance and Condition
While you cannot do much about your location or your size, you can take complete control of property conditions when you’re pricing your home. Make sure your rental property is well-maintained and in good condition. If you want to attract the highest rents, make some improvements and updates. You don’t have to do a complete renovation or sink thousands of dollars into your property. Simple updates will work. You can change out the hardware on drawers and cupboards. Improving the lighting or the landscaping can also provide major returns for minor costs. To charge the most rent, your property must be clean, functional, and attractive.
Request a Rental Market Analysis from a Los Angeles Property Manager
When Bell Properties talks about pricing a property, we’re talking about crunching numbers.
But, which numbers do you crunch?
You’ll need to look at what competing properties are renting for, to start. Before you can price your own property, you need to know where it stands compared to other properties.
This is where a professional Los Angeles property management company can really help. You can usually ask for a free comparable market analysis, which will track what similar homes are renting for in your area. This is extremely beneficial, because it will give you a range that’s acceptable for your property.
You can do your own analysis, but remember that your data will not be as reliable as a property manager’s. There’s a lot of information available online, knowing which sites and numbers to trust isn’t always easy. Property managers collect information on what tenants are actually paying for homes. Just because a home is listed at $3,400 per month doesn’t mean it actually rented for that much.
Compare other properties to your own. Perhaps you have more square feet and a better location. Those things will allow you to charge a little more. But, if the other properties have stainless steel appliances and two-car garages but you don’t, you’ll have to price your home a little lower.
Use the data you gather from a rental market analysis as a reliable starting point before you attach a rental value to your own property.
Property Management Los Angeles: Rental Price and Tenant Quality
Rental price often has a direct impact on the type of tenants you’ll place. Renters in Los Angeles today are well-informed. They know the market. They know the economy. They know what they are worth as good tenants.
Well-qualified tenants know they will likely be approved for any rental property for which they apply. This will, understandably, make them highly selective. As a landlord, you want those high quality tenants. Make sure your price is targeted to those desirable residents. They won’t waste time looking at overpriced properties, no matter how great your home is.
The tenants who are willing to pay more are those who have been denied by other landlords. They probably have negative credit, low income levels, or damaging landlord references. Accepting a tenant like that is a big risk, even if they are willing to pay a monthly rent that’s higher than the market will support.
When you’re pricing your rental property, think about renting it out quickly to a good tenant. That’s a bigger goal than getting the most monthly rent. And, it protects your property and your ROI. The long term effects of your price are more important than your immediate monthly income. You won’t earn any income at all if you have to evict a tenant or wait for someone who is willing to pay your price.
More Number Crunching: Rental Increases at Renewal Time
Essentially, you have to re-price your home every time the lease renews. Most tenants know that their rent will increase at the point that they decide to rent from you for another year. They’ll be waiting for your renewal offer, and they’ll likely have done some research on their own while deciding whether to stay or go.
Tenant retention is an important part of your investment strategy, and you don’t want to chase away good tenants with extreme price increases. You can’t do that, if your property is subject to rent control laws.
When you want to increase the rent, make sure you can demonstrate to the tenant why it’s appropriate, and make sure it’s not an outrageous increase. Stay competitive. Give them a reason to stay.
Consider adding value when you implement an increase. Perhaps a free carpet cleaning is an appropriate way to say thank you for renewing. Or, you could replace an aging appliance. A new refrigerator or an in-unit washer and dryer that they didn’t previously will go a long way towards retaining your tenants even while you raise their rent. Always give your tenants plenty of notice before you raise the rent, and keep the lines of communication open.
Pricing your Los Angeles rental property is an important part of your success as a landlord or investor. If you need help understanding the market or how to use your price to attract the best tenants, contact us at Bell Properties. We’d be happy to serve as your LA property management resource.