If you own an investment home in Ashburn, VA, then the news about the COVID-19 crisis, social distancing, and the potential for quarantine has probably been on keenly on your radar. You may be worrying if your vacancy right now is a result of your pricing or simply the result of uncontrollable events impacting our community. As your professional guide to Ashburn property management, we're happy to help illuminate the issue.
It does hold that if you don’t price your great spaces appropriately that you may turn great people away with a rent that’s too high. Alternatively, you may be underpricing your properties—and that can also concern your potential residents. They may think you have something to hide about your rental home when you're too far below your competition—and during this pandemic, your potential renters might be afraid to take a risk.
When it comes to pricing your rental home—with or without the anxiety surrounding the pandemic that many landlords are facing—you can’t set the price for your great space based on your feelings. While our community is trying to regroup in the wake of social distancing, landlords need to be aware of whether they're pricing their properties based on facts or a knee-jerk reaction.
How do you accomplish this? It all starts with the hard data you pull from your property's surroundings using a rental analysis. Let us walk you through some of the key details of the process from the perspective of an Ashburn property management company!
It's a Beautiful Day in the Neighborhood
A great place to start pricing your great space is at the neighborhood level. Even with social distancing protocol in place, you can gather most of this data from the comfort of your living room!
The goal is to assess the neighborhood in which your property resides. This will help determine if it rates high on the list of desirable attributes. It’s not just a matter of whether the neighborhood appears nice—that's all subjective. As a property owner, you know you need data to create lasting returns!
That said, what are these more critical factors to use when it comes to assessing your rental? The following are some great categories worth considering:
- Does your rental home have a high walkability score?
- What is its proximity to attractions and amenities?
- Is your property near top-rated public or private schools?
- Does your rental boast easy access to transportation and highways?
- How close is your rental to key businesses or hospitals?
- Will your renters have many dining and shopping opportunities?
When an Ashburn property management company evaluates a neighborhood, they also look a little deeper at the details. It's tough going for your rental home if there are multiple empty homes, vacated businesses, or unloved properties. This is a sign of a neighborhood that is not thriving—and a sign that you could be overpricing your property.
Comparable Properties (The Competition)
The next step after you've gotten more familiar with the community placement of your great space is to compare your property to three others that are similar. For these other rentals to be comparable, they must have several similar conditions such as:
- Interior size (square footage)
- The size of the lot
- Proximity (same neighborhood—or very close by)
- A comparable number of bedrooms and bathrooms
- Similar amenities available
- A property condition that mostly mirrors your own.
A great limiting factor to use when examining the "three bears" of your goldilocks rate is that if a home fits the criteria but has been on the market for too many days (50 or more), then skip that price. You don't want to use a long-term vacancy as a comparison in your rental analysis.
Run All the Numbers
Now you’re ready to get down to some calculations. You’ll be using the three comparable homes that you found to do a little figuring on the facts.
- First, determine the average price per square footage by dividing the rental rate by the number of square feet. So, for example, if you have a property listed for $2,200 a month and it’s 1,500 square feet, then the cost is $1.47 per square foot.
- Now, you need to find the average price per square foot of all three properties. Once you get the average of each one, add them together, and divide the total by three. If the costs per square foot for each of the properties are $1.47, $1.62, and $1.56 respectively, then adding them together gives you $4.65. Now, divide by three, and you have a $1.55 average cost per square foot for the rental area.
This will give you a quick idea of just how much you might be over or undercharging for your great space.
- Once you have the average cost per square foot, you can multiply that by how many square feet your property has.
- Use this to make adjustments based on what type of amenities your property has that the other property doesn’t have.
- You can adjust your price up if you have something extra that the others don’t have.
Maybe your property has a pool or some other highly sought-after benefit. This will account for a slight increase in the price if the renters in Ashburn demand more pools. However, it works the other way too; if your property is lacking amenities that the others have—or it has "amenities" your potential residents aren't looking for—you may need to adjust the price down.
When considering amenities, compare details like upgraded features. If you're stumped on what to dig into, you can always reach out to your Ashburn property management partner for some guidance. It's also important to consider that the community’s amenities will factor into the adjustment as well. If there are excellent amenity choices, then that can drive up your rate.
- Another item that will factor into the adjustment is the levels of occupancy that we touched on earlier.
- Look at the approximate percentage of properties that are on the market versus those that are listed for rent.
- If the occupancy rate is high, then that’s a good sign for the area and the market in general.
- However, if a high percentage of rentals are unoccupied (more than 11%), then that may mean the rate will have to be adjusted down.
Rental Supply and Demand
Your rental analysis should also look at how many homes are for rent in the neighborhood your property is in. If there are several houses for rent all on the same street (it can happen), then that's a sign you may have some fierce competition—and you'll need to adjust accordingly.
These are all factors all go into a rental analysis, among others—and we've only given you a brief overview here. Thankfully, despite the new way of life we're all adjusting to in the wake of the COVID-19 crisis, you can still carry out this research from your home office.
However, we know it's more fun for the landlords we serve to spend that time with their families rather than researching their rental! Leave the complex property comparisons to us: as your Ashburn property management guide, we're happy to offer the great people we work with a FREE rental analysis for their great spaces to create lasting returns! We know that pricing rentals correctly leads to healthier, happier communities: let's get started!