Becoming a landlord is no easy task, and once you’ve scored your first investment property, your work as a real estate investor has just begun. Before you can get your first tenants to sign their lease, you’ll need to ensure that your property is rent ready. Here is everything you need to know about getting your property ready to rent.
How Much to Charge for Rent
If you are a first time landlord, you may be wondering how much you can charge your new tenants. Before purchasing, you likely performed a rental market analysis and conducted research in hopes of securing a great rate of return on a rental property.
While every real estate investor dreams of an excellent return on investment, you can’t pull your numbers from thin air. One of the most important aspects of getting a property rent ready is knowing what to charge.
There are a few metrics and tools you want to look at when coming up with a fair price to charge renters. A good place to start is by finding your rental rate and looking at rental comps.
How to Calculate Rental Rate
Finding the rental rate for your investment property is a matter of plugging numbers into a formula. You will first have to find the following pieces of data:
- Your desired monthly net income
- The monthly property taxes
- Your monthly insurance payment
- The estimated monthly maintenance fees
- Your monthly mortgage payment (if applicable)
Once you add all of these numbers together, you must account for the vacancy rate. You can find the estimated vacancy rate by using rental comps, which we will discuss next.
If the vacancy rate is 6%, multiply the sum of all of the above numbers by 1.06. This will help you recover the cost of lost rental income in between tenants.
The final number you come up with is your rental rate. This is a good indication of what you can charge renters, but it is not the only data you should look at when deciding how much to charge for rent.
Using Rental Comps
If calculating the rental rate shows you what you should charge based on how much rental income you want to make, rental comps will show you how much you can charge based on what similar rental properties are making.
Rental comps come in the form of comparable data amongst properties of a similar size, number of bedrooms, bathrooms, and of course, they must be in the same area. Once you have this list of rental comps for your investment property, you want to take note of the listing prices, rental income, and occupancy rate.
By seeing what similar properties in the area are renting for, you can get a better idea of what the real estate market looks like. This will allow you to come up with a reasonable price for your rental property.
Related: How to Easily Find Real Estate Comps
If what you had hoped to charge is much higher than the rental income generated by similar properties nearby, you may have to consider lowering your expectations.
Remember- in order to charge top dollar, you must be providing an above-average rental property. Otherwise, you’ll never find tenants to move in. In the second half of this article, we will go over some easy ways to get your property rent ready and looking its best, so you can make the most of your investment.
If calculating the rental rate seems difficult or time-consuming and you don’t have access to rental comps, I recommend using Mashvisor’s rental property calculator. This all-in-one tool will show you the estimated rental income a property can produce based on Mashvisor’s database of rental comps. This saves you time by making calculations for you, and it eliminates the need to find your own rental comps.
Rental Ready: The Complete Checklist
Beyond knowing what to charge for rent, you may be asking yourself, “How do I prepare my property for rent?” When renting out a house for the first time, getting it rent ready can seem intimidating.
Luckily, there are easy steps you can take to get your investment property rent ready.
- Focus on the curb appeal
- Clean it up, inside and out
- Apply fresh paint
- Up-date where it’s needed
As a real estate investor, you know you will be responsible for the maintenance of your property. This includes rental property repairs from minor to major, and you probably got a good sense of these during your inspection.
If you’re lucky, the property you purchased might be close to rent ready from the start. However, if you do need to make some major repairs, try to focus on long term solutions. Many real estate investors make the mistake of putting a band-aid on problems instead of fixing them. This will only cost you more in the long run.
For example, if you need to replace siding, opt for vinyl. It will last much longer than alternatives and age well.
Oftentimes, major renovations are not necessary in order to make your rental property look its best. In fact, it can pay off to budget carefully. Small improvements can go a long way with appearance.
Clean Up and Freshen Up
Curb appeal is a big deal when showing a rental property. If there are overgrown trees or bushes, cut them back. You want your property to look neat and cared for- not neglected.
This goes for the inside too. Cleaning thoroughly is the most important step in getting your property rent ready. Glossing over the surface isn’t enough; the entire place should shine.
Once you clean up, apply a fresh coat of paint throughout the whole house. Pick a light, neutral color like white or cream to open up the space and make it appear larger. As simple as it is, fresh paint can do wonders for making your property look rent ready and inviting to potential tenants.
Update Where Necessary
There’s no need to spend a ton of money updating your rental property. Try these simple fixes:
- Replacing stained carpet
- Replacing extremely old appliances
- Replacing old bathroom and kitchen fixtures
- Recaulking where needed
When it comes to updating, you don’t have to go for top-of-the-line products. When everything looks clean and is in good working condition, you know you are finally rent ready.
Get Rent Ready Before Listing
Only put up your property for rent after it is completely finished. Never let your prospective tenants walk through an unfinished apartment. They will never believe you when you tell them you intend to paint soon and the appliances will be updated before they move in. After all, if you are serious about doing these repairs, why aren’t they already complete?
There are plenty of apartments and rental properties to choose from, and if yours doesn’t wow them from the moment they walk in the door, why should they rent from you?
Hopefully, these tips can help you get your investment property rent ready fast. Remember to take advantage of Mashvisor’s tools before listing your property for rent. To learn more about what Mashvisor can do for you, start your 7-day free trial with Mashvisor now.