Tips for Optimizing Rent

Maximize Your Cash Flow With These Rent Price Optimizer Ideas

Most new real estate investors have a certain degree of anxiety about rent prices. They want to set rent where it limits vacancy, but they also want to set rent that delivers monthly cash flow.

What they need are effective, proven rent price optimizer ideas. At HUNTAHOME, we provide DFW property management services, and we have a proven track record of helping clients optimize rent. Here’s a look at 5 ideas (and one bonus) when you need a rent price optimizer for your property or portfolio:

1. Fill Units, But Don’t Fear Vacancy

The idea of vacancy sends shivers down any investor’s neck. After all, an empty property isn’t generating revenue. It’s all expenses, and that’s a bad thing for cash flow.

But vacancy can also be a rent price optimizer. For example, assume you’ve had the same tenants in a single-family home for 3 years. You’ve raised their rent slightly each year, maybe 5%. If you raise it more, you fear they’ll move out and find somewhere else to live.

But what if the market has shifted significantly during those 3 years. If your current tenants, 3 years into a lease, are paying $1,000, another 5% increase will raise it to $1,050. But what if you could find a new tenant that would pay $1,200? You would capture the same amount of annual revenue as a tenant paying $1,050, even with 6 weeks of vacancy.

The key is to know your specific part of the Dallas-Fort Worth area and to know what rates the market will bear. If you can lease your property for $1,200, you should offer that to the existing tenants. If they refuse, an effective marketing campaign should help you get a new tenant with limited vacancy.

2. Evaluate Your Units

Many owners of rental buildings and multiple single-family homes standardize their pricing. After all, it’s easier that way. If you have an apartment building filled with 2- and 3-bedroom units, why not charge $750 for the 2-bedrooms and $1,150 for the 3-bedrooms? If you have 4 single-family homes in the same geographic area, why not charge $1,200 for the 3-bedrooms and $1,500 for the 4-bedrooms?

Here’s the answer: Because not all rental properties are created equal, even if they are similar in square footage, number of bedrooms and location.

To optimize rent, closely evaluate your units and rental properties. If a single-family home is on a quiet street, close to amenities, zoned to better schools, filled with nicer appliances and finishes, etc., you should be able to charge more for it.

Get away from standardized pricing, and start charging more for the units and homes that are worth higher rent.

3. Find Improvements That Deliver Value

Vacancy, as noted above, is an opportunity to take a big jump forward with your rental rates, at least in the right market. But vacancy is also an opportunity to make small improvements and updates that deliver huge value.

When marketing a rental property, you want prospective tenants to fall in love with it — no matter the rent. New landscaping, fresh paint and even a deep clean are inexpensive ways to make your property more enticing without spending so much that you can’t recapture your investment.

Spending money on a rental property is hard sometimes. You got into real estate investment to enjoy monthly cash flows and eventually score a big return. But the counter-intuitive way to achieve those goals is to spend money making your property better when you have the chance.

4. Zero in on Operating Expenses

When searching for a rent price optimizer, many landlords focus entirely on revenue. How can they coax as much money as possible out of their properties? But you can also save money by focusing on the other side of the equation — expenses.

What are your annual operating expenses for your rental property or your portfolio? Look through your expenses and identify places where you don’t think you’re getting the value you deserve. This could be what you’re charged for property management, repairs and maintenance, lawn services, etc.

Or, conversely, if you are getting value out of your expenses, use your aggregate expenses to help determine rent. For example, you may own 4 single-family homes that together have $60,000 in annual expenses — that’s principal and interest, taxes and insurance, repairs, maintenance, management, etc.

Now, to simply break even, you need each property to generate an average of $15,000 a year in revenue — or $1,250 a month. Assume you want a little bit of a buffer for unexpected expenses or possible vacancy, so you bump that number up to a target of $1,500 a month. Your goal is to then price the properties so that they are generating $6,000 a month, which would deliver $72,000 annually — an expected yearly cash flow of $12,000.

You might price one property’s rent at $1,000, another at $1,300, another at $1,750 and yet another at $1,950 to get there.

5. Use a Tool

The 21st century has brought with it technological innovations in all sorts of different industries, real estate investment in included. A simple Google search will turn up several different software services that help you optimize rent.

But a warning before you invest in software as a rent price optimizer: Nothing replaces local market knowledge and experience. And, software is only as good as the people who programmed it.

If you really want to use a tool that helps you optimize rent, finding the right provider of property management in Dallas and Fort Worth is your best bet.

Bonus: Hire a Good DFW Property Management Company

Are you looking to hire a property manager in the DFW area? Or, do you already have one that isn’t delivering the results you want? At HUNTAHOME, we specialize in helping owners of single-family rental properties optimize rent and maximize their revenue.

We do everything listed above: We help you navigate vacancy successfully, we help you evaluate and compare different units, we recommend improvements that deliver value, we assist in lowering operating expenses, and we also use the most modern software and tools to confirm what our real-time market knowledge and experience tell us.

When you need the best property management in Fort Worth and Dallas, trust the team you’ll find at HUNTAHOME. Contact us today to learn more about our DFW property management services.