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Are My Rents Too High or Too Low? Why Is My Unit Not Being Rented?

A full house in poker is a good hand, but a full house in the rental business may mean your rents are too low. Have you ever considered if your rents are in the range of neighboring properties. Has your city experienced a raise of lowering of rental income in the last several years?

Suggestions:

  1. Ask around to see what is a “average” amount of rent in the neighborhood.
  2. Is the renter taking good care of the unit?
  3. Market value should be fair and a good tenant will realize this and not want to move even if you raise the rent. They probably already know they have a good value for their money. It costs a lot to move.
  4. Consider replacing appliances or flooring if you raise the rent. Tenants will be happier and take better care of the unit.
  5. If your unit is not renting, maybe you are not marketing correctly. Vary the rent after a month by 10% if unit is not moving fast enough.

Pros:

  1. Increase your income with a good business plan.
  2. Have a firm plan in mind if the unit does not rent with 45 days.

Use this formula:
Figure the total amount of annual gross rental income potential you could now receive from current rents. If you have five rentals of $500, it would bring in $30,000 during the year. A 5% vacancy rate is a healthy percentage to have. Calculate that 5% of $30,000 is $1,500. That lets you know if you can keep raining rents as vacancies occur, as long as you do not lose more than $1,500 in rental income from vacancies during the year. Even with a couple vacancies for a month or less during the year, you will be below the healthy 5% vacancy rate.

Cons:

  1. Raising rents on current tenants may NOT be a good idea if they have had an increase recently or they are new tenants.
  2. You have NOT done your homework to see what rentals go for in your area,
  3. Your area is in a depressed economy.
  4. You already are getting premium rent.