How to Know When Rent is Appropriate During Turnover?

Question

BP,

Going through my 2nd turnover.  Previous tenant was in 1 side of duplex for under market rent as work was being done and now he is leaving and trying to find the maximum rent value.  Since then, Exterior and Interior has been painted, Added some nice hurricane shutters and generally improved look of property.

Previous Rent: $800.  Bumped it up to $900 and listed it on FB Marketplace.  60+ replies in 12 hrs so I bumped it up to $1,000.  A few people dropped but I am still getting interest every hour from ppl wanting more info on the unit.  Problem is I have already scheduled a group showing date for Sunday but want to get the most profit out of this as possible.  Rentometer lists average rent in my area for $1,090.  Prescreened and invited 25+ to see property.

Should I just wait until Sunday to see how many interested/qualified people actually show up?  I don't want to practice bad etiquette but I do want to get as much value out of this deal as possible as it is my first and need money for future investments/repairs.  If a large group shows up and I have multiple qualified tenants, is there a way to bid them against each other to get maximum return on this?

Thanks,

Tim

Ned J. · Answer

Pretend you are a renter looking for a place.....go to very website you would go to as a renter and start comparing what's out there the same way...location, condition, size, amenities etc etc. Look at pictures and Google map etc. That should get you a pretty good idea on what the market in your are has to offer...that will set your price. Make sure you are comparing apples to apples

Once you have that, stick with it unless you get very poor response. Not a good idea to jack it up once you get flooded with calls. If you underpriced it that bad, take it off and start over...don't get into a bidding war

I try to set mine just under market to try and get a good pool of candidates... that may leave some $$ on the table but that's better than having to pick from just 2-3 applicants or having to deal with 50 applicants

Tim Kaminski · Answer

@Brendon Woirhaye  Appreciate your response.  Yes I will look further into similar rentals and I agree about switching price.  I don't want to make it a habit but I end up second guessing my price when I receive a lot of interest.  ThanksThanks @Steve DellaPelle  Will do just that.@JD Martin  Thanks for your response.  It is early on in my experience as a landlord so trying to find that balance of how to make a good profit without driving away tenants.  I waited to increase rent after the turnover as well, just wasn't expecting so much interest and want to make sure I'm not missing out on money.  Not trying to be greedy but I put quite a lot of money into the place to get it fixed up and want to see that return sooner rather than later.

JD Martin · Answer

I would not start moving my rent around based on responses. You should already have a good feel for what your unit, in your neighborhood, should rent for, and if anything more responses should equate to a better group of finalists for the property.

We generally adjust rent with turnover or on a yearly basis. If a unit has become 'under market' because prices have appreciated considerably, we will adjust that when the current tenant moves out, or partially if it is egregiously too cheap (hasn't happened yet). Beware, however - you may be comparing your 'market' with other places that have been fixed up and are fresh on the market, so be sure you are going apples to apples.

One of my vendors has a saying: "Pigs get fat, hogs get slaughtered." I don't generally find it advantageous to try to squeeze every drop of blood out of a rock, as you then start pushing up vacancy rates, having much fewer qualified tenants, etc.

Dustin Beam · Answer

Like was said, I would just do a good online review of properties that are near yours and of similar type.

I had a similar issue with my townhouses after renovating. I wasn't exactly sure how much they would go for. So I set the price a little higher to see. I did get it rented to great renters (so far) at the higher price. But it took a shade longer so I ended up dropping the rent a little for subsequent units. But IMO, it's worth testing the market so you know instead of just guessing.

Steve DellaPelle · Answer

Hi Tim,

I think it would be very beneficial for you to take a look at your competitors and decide where you stand. You say the average is listed at $1,090...so find apartments going for this amount and see if you match up...brand new appliances? washer/dryer? utilities included? not included? square feet of the bedrooms and apartment?

This will help you determine where to set your rents. Best of luck!

Brendon Woirhaye · Answer

Its good to have interest.  Price is not the only driver, however.  If you are at the low end, you will attract low end tenants who may just be looking for any place that will take them at the lower cost.  If you price a bit higher, you will get applicants who are more interested in the neighborhood, the house, the environment.

If you use rentometer, look at the actual details for nearby rentals, then dig into them.  Are all the above average rents for standalone houses?  Are all the duplexes below the average, or above?  Do a little research into some of the closest comps and see what they rented for.  Also look at other rental sites like Zillow, Padmapper, Zumper, apartments.com.

Personally, I think it is bad faith with the prospective tenants to advertise one price and then change it or try to get them to bid against each other.