Rent in the United States is at the highest it's ever been, even compared to recent years. A one-bedroom apartment will cost the average renter about $1,769. Ouch!
Rent is, unsurprisingly, a touchy subject. Setting it too high embitters your tenants against you, but setting it too low sells your investment short. And that's to say nothing of your rental valuation falling victim to misinformation.
There are a lot of rental property pricing myths out there. Today, we tackle the most common myths on the rental property market in Beverly Hills, California.
Rental Valuation Is Totally Up to You
It's easy to assume that because it's your property, you decide the rental price estimation. Many first-time landlords charge exorbitant amounts, only to watch their properties sit vacant. You need to set your rent per the market, mortgage interests, and local trends.
Rental Market Analysis
Your rental property should sit close to other properties of the same kind on the market. Further, you should take into account inflation, advisories from the Fed, and mortgage interest rates. Use local listings as a basis to keep your rent at a reasonable amount.
Deposits Can Be as Big As You Want
Deposits help protect you in the event your tenant does great damage to the apartment. Unfortunately, many landlords don't know the most important things about them. This leads some to assume they can charge three, four, or even five times the normal amount.
Laws Decide Deposits
Check your local laws. Most places limit deposits to two months of rent. Further, there are strict rules about where to keep it and when to return it.
Rent Increases at Your Discretion
Another common mistake landlords make is increasing the rent too high for a tenant renewal. They may increase rent by 20% or even 30% for a year. Aside from angering tenants, this could be illegal.
The State Decides Rental Increases
Again, check with local statutes in your area. There may be rent controls capping increases at a certain percentage. New laws may also prevent rent increases over a certain amount in the coming years.
You Can Change the Rent at Will
It's a tough market out there. Many landlords are shocked to find out how high property taxes are. In an effort to recoup that money, they may erroneously believe they can just raise rent.
Rent Is Dictated by the Lease
Most rental properties have a year-long lease. In this case, the rent is the same every month until the end of the lease. Charging more for rent midway through isn't just unethical, it's illegal.
Manage with PMI
Rental valuation is key for determining ROI, but one too many myths about it land ignorant landlords in hot water. Use market analysis to determine rent, and only increase or change it within the bounds of law. Deposits are limited, so make sure you aren't charging too much.
PMI Beverly Hills has decades of experience charging rent and handling deposits. We'll make sure your rental is earning big, without falling victim to the above misconceptions. Get started by using our free rental analysis.
