Renting out a property to others has become a lucrative way to make a nearly-passive income. However, any good investment requires prior research, which is why property owners need to understand the current state of the rental market. You will also need to know how to analyze a property's potential ROI, taking into account the property value, the neighborhood, and even local development before you commit.
Whether you're wondering 'how much should I rent my house for' or simply exploring the possibility of investing in the real estate market, here is what Draper rental property owners can expect when optimizing 2022 ROIs!
Understand the 1% Rule
The 1% rule is a guideline for pricing your property. In essence, the 1% rule states that the amount of gross monthly rent should be at least one percent of your property's purchase price. For instance, if you're considering a new property with a purchase price of $200,000, the rental rate for the property should be at least $2,000 per month.
Property managers can tell you that while this is a good guideline to evaluate rental income for a potential investment, a thorough rental market analysis can help you find the ideal rent amount for the best returns. However, if the market analysis determines that the ideal rate isn't high enough to cover costs plus generate profit, the property may not be a good investment.
What You Need to Know to Evaluate a Rental Property
So, what can help property owners justify a 1% (or higher) rental rate for a property to maximize ROI? Whether you are looking to adjust the monthly rent amount for an existing property or examining a potential investment, taking a moment to run the numbers is a smart thing to do.
For instance, if a property requires extensive and costly repairs and maintenance before generating a competitive rate, it may not be worth the investment (depending on your budget and goals). When analyzing a potential rental investment, a few factors can influence the rate for the property.
The Property's Quality and Appearance
Is the space clean? Does it need a paint job? Your potential tenants will want a clean, well-maintained space. Plus, a quality property can attract better quality tenants and help you charge a higher rate.
If you currently have renters, you can also consider doing a mid-lease inspection to identify any issues early to help avoid prolonged vacancy periods. For example, a rental property with ongoing maintenance problems will have a tougher time attracting renters or supporting a competitive monthly rent amount.
Also, the size or square footage of a home also impacts the monthly rent amount. Be sure to work with a property management company to analyze the critical factors that go into setting the ideal monthly rent amount.
As you evaluate a potential rental property, identify what makes the place special and stand out from similar properties in the Draper, UT area. Offering the right mix of amenities can help you raise the monthly rent amount and keep your properties occupied.
Many tenants look for properties with:
- A large backyard (with a fence)
- A swimming pool
- Included laundry machines
- Smart home capabilities
- New appliances
Providing rental homes that offer what renters look for is one of the best ways to improve your ROI in 2022 and beyond!
Don't Forget the Neighborhood
While evaluating a potential property investment, you should also consider the neighborhood. Investing in a property in a desirable neighborhood is often a safer investment than choosing a lower-priced property in a neighborhood that has high crime rates or doesn't offer the local amenities renters want.
A property manager recommends considering a few key aspects of a neighborhood to optimize ROI!
Safety and Cleanliness
Is the area clean and safe? What are the crime rates? Your potential renters will look at these factors, so they are important to factor into return on investment analysis when considering a new rental property.
Much like the amenities offered in and on the property can help you find better tenants and boost your rental rate, local amenities can also help you increase your property's ROI! Renters look for more than just a house when choosing their next rental home. They also look for nearby movie theatres, grocery stores, gyms, recreational activities, and more.
Whether you rent to families or not, rental properties near good schools help you find good tenants and charge higher rental rates. Good schools also help improve property values to improve the sale price of a property when you're eventually ready to sell.
Hiring the Right Draper Property Manager Helps Boost ROIs in 2022!
Whether you are looking to invest in a potential rental property or would like to improve ROIs for your existing properties in 2022, having the best Draper property management company is key to ensuring that your investment succeeds. Reeder Property Management understands the local market and best practices required to optimize ROis for rental properties! Reach out soon to learn more about how our property management services can improve your returns.
Get insights into your rental property ROI! Use our free "Rental Property ROI Calculator."