Phoenix real estate investors, like rental property owners everywhere, want to earn as much as possible in rent. Your property’s rental value impacts your cash flow, your stability, and your long term ROI.
However, overpricing a home can lead to a more expensive problem: vacancy.
Should you hold out for a higher rent, or keep your rental price competitive to find a well-qualified tenant quickly?
Let’s investigate the risks of keeping your rental value on the higher end.
Financial Risks and Vacancy
Smart investors focus on their annual income, not their monthly income.
Focus on what your year-end profit and loss statement is going to look like, not what your monthly rental payment has the potential to be.
There’s a steep financial risk when you’re holding out for an extra $50 per month in rent. If it takes you an entire month or even longer to rent out that property, you’ve lost a lot more than the $600 per year you would have earned with that extra $50.
If you haven’t budgeted for vacancy, the risk is even higher. The key to earning money on your rental property isn’t necessarily pricing it at the highest end of the market range. The key to earning money on your rental property is consistent rental income and low vacancy rates.
It’s important to budget for at least a few weeks of vacancy every year, assuming your tenant is going to leave at the end of the lease term. If they don’t leave – that’s even better. But if they do, you have to be prepared for that gap in your cash flow. You don’t want it to be longer than it should be, and that’s a good argument for keeping your rents competitive and not too high.
Make Marketing a Priority When Leasing a Phoenix Home
Marketing is also a part of reducing vacancy. You need to work quickly when you’re advertising your property online, scheduling showings, and communicating with prospective tenants. Provide professional-level photos in your listings, offer virtual tours or self-showings so people can view the property on their own schedules.
Offering incentives is also an excellent way to avoid vacancy and get a well-qualified tenant in place quickly. Perhaps you can offer free online rental payments for the first six months or internet service or home security. Be creative and flexible, and your property will stand out from the competition in the marketplace.
Once you have a great tenant in place, provide an outstanding customer experience so your tenants stay with you. We’ve found that our best residents usually sign three consecutive leases. That’s a renewal rate we’re proud of, because it earns more for our owners.
Reduce Turnover Loss
Turnover is just as expensive as vacancy. On average, Service Star Realty is able to turn your property around in 10 days. That means it’s rent-ready two weeks after your tenant moves out, allowing us to move a new tenant in right away. This earns you more, and it doesn’t require you to hold out for a higher rental amount.
Typically, our properties are on the market for an average of 14 to 23 days, depending on when we get the keys from the former tenant and hand them over to the new tenant. The void period is low, and it means our owners earn more.
The answer to earning more on your Phoenix rental property isn’t necessarily charging more in rent. The answer is to place great tenants, retain those great tenants, and ensure your vacancy and turnover days are kept to a minimum.
We’re always happy to tell you more. Contact our team at Service Star Realty for help setting your rental value, leasing your home, or providing any Phoenix property management services you may need.