Anyone who owns Grand Rapids rental property wants to earn as much rental income as possible. It’s part of any good investment strategy.
However, there may be some good reasons to reframe that for yourself.
Instead of working hard to get the most rent, you should shift your attention to earning the most income.
What’s the difference and why does it matter? We’re talking about that today.
Vacancy Doesn’t Deliver Income
The problem with trying too hard to bring in the highest amount of rent is that you run the risk of over-pricing your home. Study the market before you assign a rental value to your investment. You have to know exactly what tenants are willing to pay and you also need to know what competing properties are renting for. If you’re too far beyond that range, you’re not going to have any tenants eager to rent your property.
Tenants are well-educated on local rental values. They’ll know if you’re overpricing your property, and they’ll avoid it.
What does this mean for your bottom line? It means a longer vacancy period, and a vacancy is expensive. Not only are you unable to earn any rent when your property is unoccupied, you’re also responsible for paying to keep it clean and well-maintained. You have to keep the utilities on in your name, and you’ll need to keep up with landscaping while you’re showing it.
When you try and hold out for a higher rent, those vacancy days are working against you. You’ll lose more with a vacant property than you will with a competitive rental price. This illustrates why income is more important than rental amount.
Good Tenants are More Valuable than High Rents
Here’s another problem with a rent that’s too high: you’re likely to attract tenants you don’t want.
It might seem to you that keeping your rental amount on the higher end will ensure that high-earning, well-qualified tenants apply for it.
Actually, those well-qualified, high-earning tenants are going to have a lot of options. They won’t rent the property that’s overpriced. Instead, you’ll be left with a pool of tenants who have likely been rejected elsewhere. They’ll be willing to pay more rent because they have damaged credit or a recent eviction and they can’t get approved at properties that are more reasonably priced.
Good tenants create positive and profitable rental experiences. Don’t settle for bad tenants who are willing to pay your high rent.
Another good reason to focus on income rather than rental price is tenant retention. If you make unreasonable rental increases after the lease term is over and the tenant you have in place is considering whether to renew, you’ll lose a good tenant. This will only increase what you spend on turnover costs and vacancy. You’ll have to find a new tenant, and that will cost money too.
Keep your rental increases reasonable and competitive.
Before you decide how much you want to charge for your rental property, consult with a professional property manager. We know the market. We understand the tenants and we’ve seen what the competing properties are rented for. We can help you balance rental earnings with long-term income.
For more information, contact us at Short South Realty Group.