Earning the most rent possible every month is the goal of many real estate investors. You want your Philadelphia rental property to bring in a consistent rental income that’s at the top end of the market’s rental range.
This isn’t an uncommon goal.
However, asking for the highest possible rent will not necessarily deliver the most income. In fact, overpricing a rental property can lead to a larger and more expensive problem, which is a longer vacancy.
We are often asked by Philadelphia rental property owners if they should charge a higher rent than competing properties, or if it’s smarter to keep the rental price competitive, which will usually guarantee finding and retaining a well-qualified tenant quickly.
Consistent Income vs. Vacancy Risk
Depending on your investment goals, which are unique to you, there’s going to be a higher weight placed on either monthly income or annual income. Some owners will want to earn as much rent as possible per month. This induces them to allow short-term rentals or even turn to vacation rentals because the per-night rate is so much higher.
Long-term investors who are more interested in their annual income will be willing to sacrifice a higher per-night rate for the stability and longevity that comes with 12 months of fixed rental income.
You’ll also have to consider what kind of tolerance you have for risk. If you’re going to wait until you find a tenant willing to pay $100 more per month than the market demands, you’re going to have to sacrifice a month or more of rental income while you look for that tenant. Do the math and you’ll quickly find that you’re losing a lot more with the higher rental amount than the lower rent and the quick move-in.
Avoid Income Loss with Smart Marketing
A competitive rental price will help you market your home. You’ll attract good tenants quickly because they’ll recognize that your property is a value. Applications will begin rolling in quickly after the showings are complete. On the other hand, if you’re asking $1,800 a month and all the properties like yours are asking $1,500 – marketing will be a serious challenge.
Offering incentives may be necessary if you’re trying to earn higher rents at the expense of your long-term income. Some owners will 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.
Increase Retention and Reduce Turnover Loss
Turnover is even more expensive as vacancy. A good way to lose a high performing tenant is by increasing rent dramatically at renewal time.
Most tenants expect their rent will go up a bit every year, and you should always implement an increase if the market supports that. However, make unreasonable demands. An increase of 10 or 15 percent might earn you more in monthly rent, but it’s going to hurt your overall income. Your good tenant will move out, and you’ll have to pay for turnover and maintenance and a whole new leasing process.
The answer to earning more on your Philadelphia 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.
If you’d like to balance your real estate investing goals with the highest possible monthly rental income, contact us at TCS Management. We’ll talk through the options.
TCS Management is a full service property management company headquartered in Philadelphia, Pennsylvania, also serving Cherry Hill, NJ, Wilmington, Delaware and the surrounding areas. We focus on single-family and multifamily residential property management of homes, condos, townhomes, and apartment buildings.
