Matt Rickards of Mynd Property Management walks us through the process for setting the rental price for your home in this blog.
This is our rental analysis tool, and we use it to answer the most important question an owner can ask and must answer: What will my home rent for?
Factors to Consider When Pricing a Rental Property
There are dozens of different factors that play into the final price that you’ll set for your rental home. One of the main things to consider is seasonality. Each rental market has its peak seasons and its slower seasons, and before you price your property, you need to be aware of the season and the number of tenants who are looking for new homes at the time that you’re putting one on the market. You’ll need to think about how you can adjust the price of your unit in the low season to rent it out as quickly as you would in the high season. There will likely be a price difference, and you need to be prepared for it.
Another thing to consider during the pricing period is risk profile. If you’re a property owner, how long are you willing to sustain a vacancy in order to get the higher rent that you want? Is it worth it to you to hold out for a tenant who is willing to pay more? Or, do you need steady and immediate cash flow, which may require you to drop your price a bit. With a more competitive rental price, you’ll get a tenant in place a lot faster. There are financial risks and rewards to both strategies, and each individual rental property owner has a different tolerance for risk. That will factor into the price as well.
Capital improvements will also play a role in how much you can charge. Owners should always be thinking about what they can do to their buildings in order to get a higher monthly rental rate. It’s also important to take a look at other buildings in the area. You have to know what your market is doing and how other owners are improving their properties. You don’t want to be the only one with dated, old, and deteriorating rental units. That’s certainly not going to help you attract the best tenants or the highest rents.
Of course, you always have to be aware of the legalities involved in pricing your rental property. Make sure you’re in compliance with any local or municipal codes and regulations when it comes to setting a rental price or raising that price during the lease term.
There is a long list of items to take into account when you’re establishing a rental value for your investment property. That’s why we’re here. Mynd Property Management can help you.
Data Powers Mynd Meter
Mynd Meter is an innovative and unique tool that leverages our internal data with other third-party data and machine learning to provide a resource that our analysts across the country can use to help rental property owners establish an accurate value for their properties. It gives our analysts a wealth of knowledge while they are engaged in the pricing process. We have learned that by combining our subject matter experts with the technology we use every day, we can create a hybrid system that works. We gather all the available resources to accurately price a rental home in any market we work in.
Data drives a lot of what we do when we’re pricing properties. But, we also know that a purely data driven approach can miss some of the qualitative analysis that needs to be completed to accurately price a unit. There has to be an element of market knowledge and industry experience in order to truly get an accurate price. It cannot all come from trends and algorithms.
Providing a Personalized Rental Analysis for Property Owner
At Mynd Property Management, we provide a personalized rental analysis for all the owners we work with and their properties.
For example, if there’s an owner with two-bedroom/two bathroom unit in Oakland, California, we will pair that owner with a specialist in the Bay area. That specialist will be supported by Mynd Meter, which provides data for the subject property. That data includes:
A list of similar properties that have recently rented in the same general neighborhood. This will give the owner and the analyst an idea of how much similar properties are renting for at the time the home is listed. Understanding what the properties rented for rather than what they were listed for is a critical difference when you’re pricing your home.
Information about how long it took for the units to rent. If the vacancies were exceptionally long, this might factor into the price our owners choose for their homes. Again, it goes back to risk tolerance. If you know that the homes with the highest price tags took twice as long to rent, you’ll have to decide what’s more important; reducing vacancy or earning top dollar every month.
Links to photos, virtual tours, and other information that will be helpful in comparing properties and settling on the correct rental value. You’ll have all of the information you need on your property and how it will stand apart from others.
The Benefit of Machine Learning When Pricing a Rental
We also use machine learning when we’re pricing a rental property. If you’re not familiar with this term, it’s a method of collecting and analyzing data that automates the building of analytical models. Machine learning is part of artificial intelligence, and it requires us to accept that systems can learn from the data we provide to those systems. Then, patterns can be identified which helps those machines or systems make decisions without the additional human input.
It sounds pretty high-tech, but it’s actually being used more and more, and we’re happy we can bring it to the property management industry, especially when it’s time to price a rental.
The machine learning models we use takes our internal and also captures third-party data. It allows us to quickly analyze and access all the factors that go into deciding whether or not a tenant wants to rent a home. That includes things like crime rates in the local area, traffic patterns and the amount of time it takes to get places, and amenities that are nearby.
The third-party listings that we use reflect the properties that are currently on the market. This allows our analysts and our property owners to get a look at what the rental market looks like right now, in real time. Combining all of this knowledge delivers the owner a personalized rental analysis. We use that to talk to the owner about priorities and tenant pools, and it allows us to come up with a pricing strategy that’s more accurate and intentional than any other in the industry.
Listing Price and Price Management
When we’re working through our pricing strategy, we’re thinking bigger than just the listing price. Obviously, that’s where we start. In order to list a home and advertise it online and market it to prospective tenants, you need to have a rental price attached to it. So, the listing price is important. But, it’s not where our analysis and our efforts stop.
With Mynd Meter, we can also consider price management. It allows us to make sure that the rental home’s price dynamically adjusted to the number of leads that listing is bringing in and the showing volume that the listing is generating. It’s an extremely detailed approach to pricing management because we can adjust the price based on what the data is telling us will happen with the prospects seeing the home.
Our in-house technology allows us to identify which prospects are most likely to convert and fill out an application. We can use that information to change the unit price to fit the vacancy. This is a huge benefit to owners, especially when we’re working with an owner who doesn’t mind a long vacancy or one who wants to rent the property as quickly as possible, even if it means a price reduction.
As you can see, there are a lot of components involved in coming up with a competitive, reliable, and accurate rental analysis. Our approach is completely unique and more in-depth than you’ll find anywhere else. We use our data, we use machine learning, and we use our local and personal knowledge of the market and the tenant pools within that market. It provides the most comprehensive and data-driven strategy for pricing your rental property.
If you have a rental property that you’d like to price with Mynd Meter, we’d be happy to tell you how it works. So please contact us at Mynd Property Management, and we will get started answering any questions you have regarding your rental analysis.
About Matt Rickards
Matt Rickards is a finance and data analyst at Mynd Property Management. He is an integral part of the team that created Mynd Meter over the last few years.