San Mateo is a unique rental market, thanks to the desirability of its location and its proximity to San Francisco and Silicon Valley. This means you have to be well-informed when you’re pricing a property.
It’s always been expensive to live here, and while rents are high and climbing, many tenants are protected by rent control and other restrictions and requirements. There are exceptions; for single-family homes and newer buildings, but, when you’re pricing your property you have to think about how to stay competitive without leaving any money on the table. You’ll also have to think about the limits on how much you can increase your rents from year to year.
Rental values depend on the market. They depend on competing properties. As a rental property owner, your goal is to earn as much as you possibly can on your rental property without overpricing it. That will only lead to longer vacancies – which are expensive.
What is Competitive Pricing?
What do we mean when we talk about competitive pricing? We’re not suggesting you should undervalue your investment. That’s only going to leave money on the table, and you’ll have a hard time catching up to market rents.
Competitive pricing is a rental value that gets the attention of tenants. The goal of your competitive price is to:
- Attract a large pool of potential renters.
- Stand out in a busy, fast-moving rental market.
- Increase the number of applications you receive.
- Avoid the expense and the danger of a long vacancy.
Competitive pricing leads to a more profitable investment experience for you.
Competitive Pricing Starts with Knowing the San Mateo Rental Market
Before you can accurately price your rental property, you need to know how strong the rental market is and what sorts of rental values the market will support. Take a look at the competition that exists for rental properties like yours. Are there a lot of homes for rent that are very similar? Or, is yours pretty unique? This will impact how competitive you must be with your pricing.
The strength of the rental market and the amount of competition will drive your price up or down more than any other factor. And, the market is always changing. The price that someone got for a three-bedroom rental home last month might be completely different from what you can charge today or next week.
Real estate investors always like to think about what they need to earn. You’re thinking about profitability and ROI. That makes sense. You’re likely hoping to earn a certain level of cash flow. Maybe you want to cover most of your mortgage payment with the amount of rent you’re able to collect.
These are excellent goals, but you can’t price your property according to your own financial needs and desires. You have to price it according to the market trends and strengths. You also have to understand that in San Mateo or anywhere in California, earning positive cash flow is not always easy. You are holding an extremely valuable investment, but it may not feel like you’re earning a profit from month to month in the early years of your investment journey.
Think about Your San Mateo Tenant Pool and Who You’re Attracting
Your prospective tenants understand the market. They have access to almost all the same information you do, and they know what they’re willing to pay in rent. Well-qualified residents will not pay more than they need to.
Competitive pricing is important in attracting good tenants. A competitive rental price will get the attention of those good tenants. Think like a tenant when you’re pricing your home. They know what they can afford, and if your rental unit is within their budget, give them a good reason to choose your property over all the others.
The danger in overpricing a home is that you might attract under-qualified residents. A tenant who has been rejected from rental property to rental property because of their bad credit or inadequate income might be willing to pay a higher rent just to be approved for a home. Don’t set yourself (or your renter) up for this king of failure.
Proper Pricing Starts with a Comparative Rental Analysis
As you determine how much your San Mateo rental property is worth, you’ll need to consider some main comparison points between your property and others like it.
A comparative rental analysis is a good way to establish a range for your current market.
- Take a look at other rental properties in your neighborhood that are similar to your own. You want an accurate comparison, so limit your search to those properties that are similar in size, condition, and amenities. Check out the units and homes within your block or zip code. Properties have different rental ranges in different areas of San Mateo. What tenants are paying in one neighborhood may be dramatically different even across the street. Use your own neighborhood or you won’t get accurate comparisons.
- Check out what your competition is charging, and make sure you’re setting your price at or below what the range seems to be. That’s going to keep you competitive, and it’s going to avoid the risks that come with overpricing.
If you have some experience in the San Mateo rental market, and you can easily access accurate data and good information, you can likely conduct your own comparative rental analysis.
But, if you’re relying on the listing prices you see online and you’re not sure what properties are actually renting for, consult a San Mateo property management company. You’ll be able to leverage accurate, up-to-the-minute data that’s going to prove far more trustworthy as you’re pricing your rental. Not only can we tell you what similar homes are renting for, we can also talk about how long it’s taking them to rent. We can track the response rates to your marketing and figure out whether your price needs to trend higher or lower.
San Mateo Location Matters When Pricing Rental Units
Every property, whether it’s being sold or rented, is at the mercy of its location. Especially when we are talking about the price you attach to it.
Rental properties in San Mateo bring in high rents, especially if they’re located in desirable neighborhoods and close to markets, shops, restaurants, entertainment, and highways. Tenants in San Mateo tend to be very specific about where they want to live. When your property happens to be in a great area, you’ll earn top rents.
There’s not much you can do about the location of your rental property when you already own it. You simply have to consider what the location offers and be realistic about what it doesn’t offer. When you’re attaching a rental value, think about whether people will be willing to pay more to live there, or if you’ll have to settle for something less.
Before you invest in a rental property, remember that location is something to consider when you’re crunching the numbers and estimating what you’ll earn in rent.
Property Condition Influences Rental Value
We just talked about how you cannot necessarily control your location.
But, you have complete control over the condition of your rental property in San Mateo. When you allow your property to look worn and run down, you’re losing rent money. Keep it well-maintained, and make some strategic upgrades and updates.
What kinds of upgrades can really impact your rental value? Try these:
- Carpet vs. Hard Surface Floors
Hard surface flooring is going to be more valuable than carpet. This is a serious trend in rental housing, especially in markets like San Mateo. Carpets can get old and tired really quickly. We know it’s easy enough to steam clean those carpets during every tenant turnover, but you don’t have to. Hard surface floors are easier to maintain. You won’t have to clean or replace them the way you clean and replace carpet. Tenants prefer them too because they’re more attractive, generally. They also tend to be the healthier option because they don’t trap dust, allergens, and pet odors.
- Invest in Cosmetic Kitchen Renovations
San Mateo rental homes need to have impressive kitchens, especially if you want to price your property competitively and profitably. Add value to your property by providing a great kitchen space, where there is bright lighting as well as energy-efficient appliances, new fixtures and faucets, and clean, modern cabinets. Be creative with storage; built-in shelving can do wonders. Provide a clean and welcoming space in the kitchen that is clean and modern. Consider installing tile or ceramic backsplashes and new faucets. Replace drawer pulls and cabinet hardware.
Pay attention to things like fresh paint as well, and nice landscaping. These minor investments will not only raise your rent; they’ll also attract better tenants.
If you’d like to hear details on how we price your rental properties in San Mateo, we’d be happy to tell you more. The right price point depends on your unique property, and we’d love to take a look at it and offer you our suggestions. Please contact us at Sharevest Property Management.