As new owners of a rental property in Long Beach CA, the main goal is maximize the value of your asset. With many ways to determine the value of a real estate asset, how can you determine if you are getting the most from your rental? Today we want to share a few key strategies you could use to evaluate the success of your Long Beach rental property.
Determining a fair market rental value is key for the success of your Long Beach rental. When landlords fail to adjust to the current market, it can increase vacancy rates and lower the yield on the asset.
Some landlords may want to over charge their tenants, this can lead to empty units that would otherwise provide cash flow if priced fairly. On the other hand, undercharging for units can be a financial burden as you would be leaving money on the table month after month.
Much like the price of real estate, rents can change based on current market pricing, supply and demand of rentals. When deciding on a fair rental amount, you should use as many data sources as possible to establish a baseline for your rental. Learn how much comparable units in your area are renting and consider factors such as:
Other elements that can help determine rental rates are:
Rental yield measures profits generated annually from the investment as a percentage of its value. You can use your rental yield to evaluate the profit from your investment. High yield properties bring in steady income. Ideally you should be looking for a rental yield above 5% for stable rental income. Understanding and observing property values and their rental yields can be a helpful tool when investing money in your own Long Beach rental property.
Measuring your return on investment to determine your property’s profitability is important. ROI measures the profit that is made on an investment in the form of a percentage of the cost of said investment. It demonstrates the effectiveness and efficiency your investments in your property are being used in order to produce profits.
Although there is no defined formula for calculating ROI on a rental, due to there being too many variables. A simple way to calculate ROI is, subtract the initial value from the current value and divide the number by the beginning value.
ROI = (current value- initial value) ÷ initial value
Normally, a 10% to 15% return is considered good, though due to all the variables included with a rental property such as repairs, vacancies, and other unexpected costs the results can change greatly.
The occupancy rate of rental properties can have an extreme effect on its profitability. Occupancy rate is the number of months in a year your property will be occupied by tenants. Generally keeping tenants long term makes the relationship between profits and occupancy a mostly positive correlation.
There’s a number of circumstances that affect occupancy rate. Some can be controlled by either the landlord or
property management company like developing accurate rent estimates for your area, marketing your vacant property aggressively, and screening tenants to receive credit reports and rental history in order to find ideal tenants. While other circumstances are dictated by the market.
If you feel you need help evaluating the success of your Long Beach rental property feel free to call us at (562) 888-0247 or feel free to fill out our
free rental analysis to see what your rental could yield today.
