As a rental property owner in Hampton Roads, it is essential to set the right rent for your unit. Your rent determines if your rental business will be profitable in the long run, as your renters will pay attention to how much your house is worth. You need to ensure that your rent is substantial enough to bring you profit but is not too high to drive off tenants. Since landlords cannot randomly start charging a specific price from their tenants as rent, there is a lot to consider.
If you are a new landlord looking for guidance on correctly pricing your property, here are ten key factors to consider:
Every renter wants to live in a good neighborhood with many activities and amenities. Therefore, the location of your unit is one of the most critical factors to consider when setting the rent price. In the Hampton Roads region, areas like Virginia Beach, Chesapeake, Norfolk, Richmond, and Newport News can provide the best ROI. These areas offer the following features to its renters:
Access to amenities such as urban centers, restaurants, and parks
Proximity to schools and universities
Good business district businesses
Proximity to public transport
Ability to enhance the overall quality of life
Naturally, these locations tend to command higher rent prices than rural or less desirable areas. Therefore, you need to research the rental market in your area to determine the appropriate rent price for your property. You can determine if you want to reduce or increase rent based on such vital factors.
Property Condition and Age
The condition of your rental and its age are other crucial factors to consider when setting the rent price.
The state of every unit deteriorates with age, which can cause the following issues:
Broken and faulty plumbing
Damaged roof and windows
Shabby and peeling paint
Mold, infestation or water seepage
Damaged floors and stairs
Tenants will look for properties that are newer and in good condition as they will cost less to maintain. If your property is well-maintained and in excellent condition, you can justify charging a higher rent price. On the other hand, if your unit needs significant repairs or upgrades, you may have to lower the rent price to attract tenants.
Moreover, tenants are more driven towards newer properties that offer modern amenities and a positive living experience. So, considering the condition and age of your property in Houston Roads can help you ensure that you are charging a fair price for the tenants in your market.
The size of the unit can also impact rent prices as larger properties offer more living space. Such spacious properties appeal to a section of tenants who like luxurious abodes and are willing to pay the required fee. Many high-income professionals currently prefer to rent properties that are big and spacious and contain the following amenities:
More bedrooms and bathrooms
Additional storage spaces
Outdoor living spaces
Another reason you should consider the home’s size while deciding on the rent is that it also impacts your expenses. A larger property may require more maintenance and repairs, which can be costly for landlords. It may also require more utilities, causing landlords to set a higher rent price to offset the additional expenses.
Therefore, considering the property's size while setting rent can help you ensure a fair price depending on the house's value, tenant pool, and future expenses.
Another factor to consider when setting the rent price is the amenities your unit and its neighborhood offer. Properties with desirable amenities and neighborhood amenities, such as:
Access to restaurants
Such amenities can command higher rent prices as they elevate the tenant's living experience. They also alter your potential tenant's life for the better. Therefore, if your property offers such amenities, a higher rent price is justified. However, maintaining it requires considerable time, effort, and money, making it challenging. As the landlord, you need to factor in the cost of maintaining these amenities and then decide on the right rent price to charge your tenants so you can make a profit.
State of The Local Rental Market
Keeping up with the latest market trends is also essential when setting rent prices. For instance, if the rental market in your area is experiencing a shortage of such apartments, you can charge a higher rent price. On the other hand, if there is an oversupply of rental properties in Hampton Roads and the surrounding area, you may need to lower your rent prices to attract tenants.
Your Investment Goals as a Landlord
Owning an investment unit can be challenging, especially if you plan on doing everything yourself. It is not as easy as repainting your property and getting tenants to occupy it. It requires you to have clear goals for your business. You may be an investor who owns a diverse real estate portfolio, or you may be a new owner looking to rent out your unit, or you may be an accidental landlord. Either way, you need to examine your goals and what you want from the unit so you can take the required steps accordingly.
Once your goals are decided, you must ensure that your property generates positive cash flow consistently. If your rental is in a good area like Norfolk, Portsmouth, Hampton Roads, Virginia Beach, Suffolk, Chesapeake, or Newport News, where the demand and the prices are high, you may set a high rent price and earn a good profit. However, if you live somewhere with little demand for units like yours, you may need to charge less from your tenants.
The demographic of your target tenant also plays a role in setting the rent price. Tenants of different ages have varied budgets and financial capabilities. For instance, if you're targeting college students, you may have to set a lower rent price than if you're targeting young professionals or families. If you have a rental in an area where predominantly families reside, you may be able to charge a competitive rate for families.
However, if you plan on renting out to students and individual tenants, you may have to revise the price accordingly. By understanding the potential tenant demographics, landlords can ensure their properties are equipped with the amenities and services that will appeal to their target tenant population.
It is essential to consider your operating costs when setting the rent price. Operating costs include expenses like:
It is important to factor in your operating costs to ensure you are charging a rent price that covers your expenses and provides you with a return on investment. Failing to consider operating costs when setting the rent price can result in financial losses for you, as the landlord.
If the rent price does not cover the operating costs, the landlord will have to cover the difference out of pocket. It can be particularly problematic if unexpected expenses arise or the property is vacant for an extended period. By considering the operating costs, landlords can ensure they set a competitive rent price while covering their expenses.
Local Laws and Regulations
It is important to be aware of local laws and regulations that may impact your unit’s price. Rent control laws, for example, may limit the amount you can charge for rent in a particular area. In addition, there may be regulations related to rental fees and taxes that can impact the overall profitability of your unit. In Virginia, there are no rent stabilization or rent control laws. It means that as the landlord, you can set and increase rent across the state once you give your tenant the proper notice.
A landlord can raise the rent in Virginia upon the termination of a lease period. A landlord must give a 30-day written notice of the increase. If a tenant objects to the new rent amount, they have the right to vacate the unit within that 30-day period.
While increasing the rent or setting a rent price for your unit, it is essential to be careful. Even though there is no state-mandated limit on how much rent you can increase, it must be reasonable. Avoid illegal rent hikes due to the following:
Breach of contract
The current economic conditions can also impact your rent. A booming economy with low unemployment rates and high job growth can lead to an increased demand for rental properties, allowing you to set higher prices. On the other hand, an economic downturn with high unemployment rates and low job growth can lead to a decreased demand for such properties, requiring you to lower your rental prices.
Additionally, the current economic conditions can also affect your operating costs as a landlord. For instance, during times of high inflation or rising interest rates, your expenses may increase, leading to lower profits if your rent price is not adjusted accordingly. Any changes in government policies, such as tax or regulatory changes, can also impact your bottom line. Therefore, it is essential to stay up-to-date on the latest economic trends and conditions to make informed decisions about setting your rent price.
How Can a Property Management Company Help You?
If you find it challenging to follow all of these considerations on your own, you can entrust the pricing of your Hampton Roads investment unit to a capable property management company. We at Doud Realty Services, Inc. give you a free rental analysis when you sign up with us. We compare your property to similar ones in the local market and help you decide on a competitive price. By working with us, you can secure good tenants and positive returns in the long run.
Feel free to call Doud Realty Services, Inc. for your property management needs.