If you're a landlord in the Silicon Valley area, you'll know there's no shortage of demand for rental homes. That doesn't mean you've got carte blanche when setting rental prices in this area.
Despite the high demand, it can still take up to six weeks to find a new tenant and lease renewal rates are below 50%. The best way to ensure you attract and keep tenants is by setting a fair rent price for your investment property.
The only way to do this is by conducting a comprehensive rental analysis. Read on to find out how.
The Purpose of a Rental Analysis
Ideally, you should undertake a rental valuation before investing in a property. This will help you determine your ROI on various properties to make a profitable property investment decision.
For accidental landlords and those who already own a rental property, rental market analysis helps you compare your offering to the competition and set an attractive rent price for your property.
An annual rental review can help you put fair increases in place every year and encourage lease renewals.
Steps Involved in a Rental Analysis
Before you start your rental analysis, getting up to speed on current real estate trends is vital. You can check websites like Zillow, Realtor.com, or Redfin for this information, or speak to a real estate agent.
These factors can impact the expected ROI on your real estate investment, so it's important to keep them in mind as you progress through the following steps:
Geographical Analysis
Location has an impact on all types of real estate investments. Take a deep dive into the following aspects of the city and neighborhood surrounding your property:
- Current property prices
- Real estate appreciation rates
- the number of renters vs. homeowners
- Average rent rates
- Demand for rental homes
- Purchase price vs. rent
- Average operating costs
A real estate agent or experienced local property manager can help you carry this out most efficiently.
Rental Comps
Compare similar rental properties within the same zip code. These should share many characteristics with your investment property, such as:
- Size and no. of rooms
- Amenities
- Lot size
- Age and condition
Note the rent landlords are charging for these homes, so you can determine a fair range for your property.
Rent Calculations
Finally, consider the operating costs and your desired ROI for your investment property. Operating costs include your mortgage, property taxes, and maintenance costs.
If you intend to hire a property manager, you should include their fees, too. These figures will help you determine a rent price within the range for the area to attract tenants and ensure a healthy profit.
Maximize Your San Jose Investment
A complete rental analysis is your first step toward profitable property management. Following the above steps will help you get started, but you'll always enjoy more accurate results when you get expert help.
Provident Property Management can assist you with every aspect of property management. Our services include rental analyses, tenant screening, property maintenance, and more. Let us do the math for you and help you thrive as a San Jose landlord.
