Many new or do-it-yourself landlords in Honolulu often make the mistake of not knowing how to calculate a fair market rental rate for their property. Because of this, many rental property owners under- or overestimate how much rent they could charge and end up losing money as a result. This is especially true as rents continue to rise across the country. If you do not increase your monthly rent to keep up with the market, you are making an unsound decision. However, when you have an occupied property, knowing how to raise rents the correct way becomes especially important. While good advice on how to do it is abundant, the most important tool you have to understand and use is the rental property assessment.
Fair Market Rent
A property’s fair market rent is the rate similar properties are being rented out for in a specific area. Since the market rent is not the same for every neighborhood, you need specific and local numbers to calculate correctly.
For a Honolulu property, you can begin by finding out what other landlords charge their tenants. You will also need to look at comparable properties, or comps, to make sure that the other rental properties are similarly sized & furnished to yours. Some detective work is needed to get this information. The local classified ads and posted rentals within your area will be a good place to start.
You can also contact a Honolulu property management company like Real Property Management Alliance for a ton of information about the rental market. When you have three or more comps in hand, you can start calculating the average monthly rent and compare the result with your current rate. You now know the fair market rent for your property.
Regular Rental Property Assessment
Calculating the fair market rent is a necessary first step. However, it is only the beginning of ensuring your rental property’s profitability. For you to maximize your monthly cash flows, you must re-calculate the fair market rent for your Honolulu property annually, or even more often, if rents are volatile. The shortage of single-family rental homes has caused a surge in rental rates in most markets across the country. If you have not conducted a recent rental property assessment in your area, it is likely that your rent charges are too low.
Still, it’s not just about money. There are numerous reasons that make property owners hesitant about raising their rent. Some are worried that if they raise their rent, their rental property will become harder to lease. Still, other landlords are afraid to set their rent at the going rate thinking their rental house won’t be competitive, and they’ll have trouble finding tenants. Or they might not want to anger a current tenant who has been renting from them for a while. Still, if you have not changed your rents for a few years, your current tenant could be paying way below the rental rate everyone else is paying.
Professional Property Management Pays for Itself
It can be time-consuming, and even nerve-wracking, figuring out the correct amount in rent to charge. Even with intensive market research, you may still be concerned that raising your rent will cost you your tenant. For these reasons, it is helpful to have a professional property management company assess your property and set your rental rates. The cost of hiring a property manager hinders some landlords from doing so. But if you are charging lower than the usual amount of rent, you are already losing more money compared to paying someone to manage the property for you. By giving you accurate rental rates and working pleasantly with your tenants, a professional property management company can help you increase your monthly income, therefore paying for itself.
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