Around 36% of Phoenix households rent, but these individuals have seen a 76% increase in rent prices since 2016. How do landlords determine how much to charge and when to raise rates?
Most use a rental analysis to find these answers. They use these when buying properties or evaluating current properties.
A rental analysis helps you maximize your income for a property by determining the right price to charge. But do you know how to do this as a first-time landlord?
If not, continue reading as we explain the critical steps required to complete this process.
Research Comparable Properties
The first step in a rental market analysis is comparing the property to similar ones. Real estate experts call similar properties "comps."
A comp is a comparable property to the one you're analyzing and is helpful when setting rental rates. As you search for comps, look for properties that have:
- Similar size
- Same amenities
- Comparable neighborhoods
- Similar conditions
If you need help finding comps, talk to a turnkey property management firm. They'll know how to find them and can help you find them if necessary.
Evaluate Property Features
Next, evaluate the property features your rentals have. Look at the number of bedrooms and bathrooms and consider the square footage. Study the property's condition and amenities, including parking and outdoor space.
These features influence rental rates, and you can use them to compare to the comps you found. If your properties are nicer or larger, you might be able to charge more than the comps.
Understand Market Trends
Additionally, study the current property rental trends to see what's happening with the market. For example, are rental rates increasing? If so, why?
Rental rates often increase as demand increases and supply decreases. When income averages rise, it may also lead to rental rate increases.
Set the Right Price With a Rental Analysis
Finally, after gathering this information, you can begin to analyze your properties. The goal is to determine the right rental rate to charge for your units.
The right rate is one that is high enough to make money but low enough to keep the unit rented. To determine the right rate, look at the information you gathered.
Additionally, calculate the potential return on investment (ROI). This calculation involves determining your expenses for the property to ensure you can cover them if you purchase the property.
As you complete this process, consider hiring a full-service property management firm. They can help you perform the investment property analysis.
They can also give you tips and rental income strategies and provide rental property management services for your properties.
Hire a Property Manager to Help
Conducting a rental analysis is important when purchasing properties, but it's also essential for current properties. While you can conduct these yourself, hiring it out is more efficient.
Are you considering hiring a property management firm to assist?
PMI San Tan can help. We are a full-service property management firm in Phoenix, AZ. Our expert team has decades of combined experience and can help you with every area of your rental property business.
Get in touch with us today to learn more.
