Why it is Important NOT to Overprice Your Rental Properties

WHY IT IS IMPORTANT NOT TO OVERPRICE YOUR RENTAL PROPERTIES

As an investor renting out my own rental properties, and a real estate agent working with many investors we always want to maximize profits. With many housing markets on the rise and a lack of inventory of homes and rental properties, it is natural that supply and demand pushes pricing up. Looking across the landscape of rental properties in the markets that I work in, there is a big trend in overpricing rental properties, well above what market value would support. This seems like a great thing for the owner, as these properties are still getting rented out but there is a pretty big potential pitt fall.

Most owners want to get a quality tenant that will pay their rent, take care of the property and typically stay a long time without much issue. The issue is that if you are one of those tenants you probably have a good work history, decent credit, rental references, and some money reserves stashed away. If you have all of that going for you, why would you want to pay over market value for a rental property? The answer is that you won’t want to, and won’t have to. If you are the ideal tenant, then you should be able to find a nice rental property that charges market value.

This brings up the next question, if an overpriced rental unit doesn’t bring in the ideal tenant then who is it bringing in? Think about it like you are purchasing a car. If you have good credit and income you can purchase a new vehicle with really low interest and good terms. If you have bad credit and shaky income then you will purchase from a buy here / pay here lot, with terrible terms, and high interest. It isn’t ideal, but it is the only way you can qualify. This rule applies to rental properties as well. If you have bad credit, bad job and rental history, then you may be willing to pay well above market value just to be able to get a rental property. This type of tenant is also much more likely to move out as soon as they find a better option, and may not take good care of the property.

Hope this helps show the other side of pricing your rental property too high. Post below any experiences you have had in pricing your rental properties or being a tenant in this situation! 

 Good Luck!

Aaron Poling