PRICE 5 If everything else checks out, then it is the price. This is especially true in high-inventory markets where tenants have choices. Why rent your place for $2,000 per month when there is a unit up the street for $1,500? Almost any unit will rent at the right price. Yours may be higher than what tenants are willing to pay. Look at what competing rentals are going for and look at (1) amenities, such as pools, tennis courts, and clubhouses and (2) overall condition. Sometimes you may not need to lower the price if it means upgrading the kitchen. Once you determine the cost of the renovation, look at the payback period to determine if the timeline is acceptable to you.
For example, if a light kitchen remodel costs $10,000 and allows you to increase the rent by $500 per month, it would take 20 months to recover the cost.
Total Renovation Cost ÷ Monthly Increase in Rent Payback Period
The Calculation on Renovating:
FINAL THOUGHTS I hope this helps. It can be frustrating when you don’t have control over the overall market. There are forces outside of our control, whether it is changing regulations, new construction creating an oversupply, or even just lower tenant demand. Work through these five steps and hopefully you can convert these views into applications and those applications into happy residents.
RICK ALBERT Broker Associate LAMERICA Real Estate ralbert@lamericausa.com
Rick Albert is a Real Estate Broker Associate based in the Los Angeles area with a focus on the residential space. He is also a multifamily out of state investor, real estate commentator, and host of The Key to the City of Angels podcast.
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