Setting a rental rate seems like a no-brainer: obviously, you set a rate that will cover the mortgage and other fees incurred (repairs down the road, perhaps) and maybe a little extra to gain a profit.
Not so fast!
Setting a rental rate has more factors than you would think, especially if you’re new to the property investment game. When investing in real estate in San Antonio, there are multiple distinct facets to determining the rental rate.
Most importantly, you want to understand as a first-time landlord, or maybe a multi-year landlord looking to update your policies, what the average rate is in your area for your type of rental property. This idea of understanding the rental rates in your area is called comparable properties or "comps" and are part of the bigger picture, which is called a market analysis. Conducting a market analysis can be time-consuming alone; a property management team can be a valuable asset.
Know Your Market
When conducting a market analysis, the first thing you want to focus on is the different rental properties in your area. Mainly, you want to focus on how well rental homes perform in the neighborhood of your choosing:
- Are they vacant or occupied?
- How many rental homes exist in your market?
- How many of them are single-family rentals versus multi-family residences?
Vacant Versus Occupied
Before purchasing an investment property in San Antonio, you want to determine how active the rental market is in the area you’ve chosen. If, for instance, rental homes are consistently occupied, either for long periods or with frequent turnover (say an area that has a lot of students near a college campus), then this will be a great part of the city to invest in. However, if it proves to be just the opposite, your rental property could end up costing you dearly over time and prove to be a bad investment.
How Many Rentals Are Available?
This step in your market analysis is about knowing just how many rental properties are in your area: are there a multitude of rental opportunities, or are you the belle of the ball? This can be somewhat of a "Goldilocks situation"—too many or too few can make it difficult to be relevant in your area. The availability or lack thereof can also drive down or sky-rocket the rates in your neighborhood. The availability of rentals can either make you a unique opportunity or one of many, which could allow for higher rates—either way, gathering this data is essential to the beginning of your market analysis.
Single Occupant Versus Multi-Family
Once you’ve determined the number of rental homes in your area, you want to make sure you understand what kind of rental properties are available: if apartment buildings dominate a neighborhood and you have a house for rent, customers may not flock to your single occupant residence.
The other thing to consider in this same scenario is the responsibility bestowed upon owners of a single occupant residence: when you live in an apartment, for example, the expectation is that the landlord will take care of maintenance (like lawn care). However, that expectation is flipped on its head in most single-occupancy rentals. if you find more single unit homes in your area, this additional responsibility may be more acceptable to a new tenant.
As a stand-alone landlord, you can research the market using simple searches like “Rental market analysis San Antonio,” which can give you insight with neighborhood blogs, reviews, and local statistics. You can also utilize more reputable websites like Trulia and Zillow; Just keep in mind that this data, especially outside of the national sites, can be outdated. You’ll also have to compare many reviews to gain a composite overview of the area.
As mentioned previously, one of the key elements of a market analysis is determining the comparable properties in your area. This will allow you to break down the average cost per square foot, assess what fees are typically charged (like security deposits and background checks), and also zero in on the average turnover rate for your specific kind of rental unit in San Antonio.
Comparing Local Properties
With national websites like Zillow and Trulia, you can often find comparable information for the city, but you can’t necessarily rely on this information to be accurate, but more of an average. To understand what other rental properties like yours charge per square foot means researching local information. The price per square foot is much like comparing the breakdown of cost per ounce at the grocery store, and savvy renters will know to look for this. Your comparable properties should have the same number of units as your own, with roughly the same amount of square footage and similar amenities.
Renters in San Antonio expect to encounter fees when applying but understanding the average cost of those fees in your neighborhood will allow you to set realistic expectations of what kind of money you can make back on your expenditures. You always have to assume that your potential tenants are scouting out several properties at a time, so if your property charges higher fees or asks for more on the security deposit it could take you out of the running.
Going back to those comparable properties, you can determine what a renter in your neighborhood is expecting. Hopefully, the expectation will align with what you’re spending on background checks and credit pulls—but that’s never a guarantee. You’ll also need to consult the laws of your local government when it comes to security deposits and fees as to how much you’re allowed to charge.
Average Vacancy Time
The comparable properties in your neighborhood can also determine the average turnaround time from a renter moving out to bringing in a new tenant. This aspect of renting is vital to understanding what your monthly rent needs to try and overcome: If the turnaround is quick, within a week or so, then you won’t have much to catch up on. However, each day a property sits vacant is money out of your pocket, and it may not be a wise investment if the turnaround is half a month or more.
A Property Manager Is Your Expert Partner
The research we discussed can be conducted successfully by a single landlord, but it takes extensive experience and effort to pull together and then utilize a market analysis profile successfully. By partnering with Real Property Management Campanas, the work is already done for you.
Our team of local experts continuously gather up-to-date data about the neighborhoods they work with and can help you not only set a rental rate but help you determine if this is a good property investment from the beginning! Contact Real Property Management Campanas today for a FREE property analysis of your rental and put our decades of experience to work for you!