This week, a headline stopped everyone in their tracks: in the top 50 metro areas in the US, it's now cheaper to rent than buy a home. You might wonder what this means for your rental income if you are a real estate investor.
You may have even heard a few myths about it, so we have compiled this short guide. Read on to learn the truth about rental valuations as we dispel the four most common property pricing myths for Austin, TX.
1. High Rents Mean High-end Interiors
Don't fall into the trap of revamping a rental property, thinking it will add value and help you increase the rent. While some expensive rentals may have top-of-the-range features, that doesn't mean all rentals will benefit.
Other crucial factors shape your rent price more than interiors. These include the location, size, and, most importantly, rental market demand.
If you have a sought-after property, whether because of the location or something unique and unusual, that will help you raise the price more than an impressive interior.
Nevertheless, if you have a tired interior that needs some polishing, that can help secure you a tenant faster.
2. Rental Rates Always Go Up
It's tempting to imagine that once you buy a property, your income will always increase yearly. Rents are higher now than a decade ago, so it's understandable that landlords assume rates will always go in one direction.
However, that's not always the case. Rent is governed by demand.
When demand is high and houses are in short supply, you'll see a rise in rental rates. But the opposite can happen. If there is too much stock on the market and demand from tenants is low, landlords will begin to drop rates.
3. Raising Rates Is the Only Way to Be Profitable
Once you've invested in a property, you'll consider the rent your income. The more rent you charge, the higher your income will be and, thus, the greater your profit from your investment.
However, that's not the complete picture. You'll have expenses for your property. If you can manage your costs, you'll make a better profit.
Other steps to improve your income outside of rent are also possible. For example, you could make your property pet-friendly in exchange for a pet surcharge on the rent.
4. You Can't Negotiate Rent Pricing
If your property has been vacant for some time, you might find a tenant offering less than your advertised rent.
Don't be surprised if this happens. It's more common than you think, and it's worth negotiating.
It's best to enter a negotiation if that tenant has other favorable characteristics, like an excellent background check and good references from previous landlords.
Getting Your Rental Valuation Right
Now that we've dispelled these common myths, you can see that it is essential to do your homework before getting a rental valuation. Getting it wrong could leave you with an empty property-something you'll want to avoid.
Getting expert help with your valuation can make a huge difference.
As Austin natives with extensive real estate experience, the Austin Property Management team knows the market better than anyone and can help you set the most competitive price.
Start by looking at our property management services in Austin, TX.
