New York City rents dropped a bit during the pandemic, especially in Manhattan.
But, they’re rising again. In fact, the median rent in Manhattan jumped more than 18 percent in the beginning of the year, according to Bloomberg.com.
What does that mean for your rental property and its rental value?
Pricing is a challenge. You want to earn as much as you possibly can on your rental property, but you don’t want to overprice it because that will only lead to longer vacancies – which are expensive.
How can you price your New York rental property competitively while remaining profitable, especially in the current market?
We have some ideas.
First Step: Know the New York Rental Market
Before you price your rental property, you need to know how strong the rental market is. You’ll need to figure out if there’s a lot of competition for rental properties like yours or if the market is flooded with inventory and therefore competitive for owners who are seeking good tenants.
The strength of the rental market and the amount of competition will drive your price more than any other factor. Keep in mind that the market is always changing. You might have heard that someone rented out a property like yours for $4,500 last month. Well, things change from month to month and season to season and even day to day. That same home may only be worth $4,200 now. Or, its rental value may be higher.
Are there a lot of units available? Or, is it increasingly difficult for renters to find well-maintained apartments in their price range? These are the things that will impact how you price your property.
Investors always like to think about what they need to earn. Maybe you’re 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 be prepared for any shifts or corrections that may be approaching New York real estate.
Seasons can also have an impact on rental price. Have you ever tried to move in early February, when snow on the streets has turned to slush? People don’t like to move in the winter. They don’t like to move over the holidays. You might have to price your home more competitively during those months, especially if you want to find a good renter.
Higher prices can often be found during the late spring and summer months, and even into autumn. You’re getting more tenants who are looking around at those times.
Think About Your New York Tenant Pool
Your prospective tenants understand the market. They know what they’re willing to pay in rent.
Competitive pricing is important in attracting good tenants. With remote work on the rise, a large chunk of the city’s population can easily move out if they want to. Give your best tenants a reason to stay. Provide a competitive rental price, a great rental experience, and a lot of value in the home they end up renting from you.
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.
Begin Pricing With a Comparative Rental Analysis
As you determine how much your New York rental property is worth, you’ll need to consider some main comparison points. A comparative rental analysis is a good way to establish a range for your current market.
Take a look at other units in your building and properties in your neighborhood that are similar to yours. You want an accurate comparison, so limit your search to those properties that are similar in size, condition, and amenities. Check out the units within your block or zip code. Properties have different rental ranges in different areas of New York. What tenants are paying below 34th Street in Manhattan is much different from what they’re paying in Brooklyn.
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 New York City rental market and access to 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 units are actually renting for, consult a New York 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.
Location Matters When Pricing Rental Units
Your property’s location will always influence its price. This is true of any rental market, and in New York City, location is even more important.
Rental units in Manhattan traditionally earn top rents, especially if they’re located in desirable buildings and close to markets, shops, restaurants, and transportation. Tenants in New York tend to be very specific about where they want to live. When your property happens to be in a great building and on a pleasant block, you’ll earn top rents.
If you’ve got a doorman in your building, the rental value goes up. If there’s some outside space in a courtyard or a balcony, you can charge higher 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 what it doesn’t) when you’re attaching a rental value. 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 Impacts Rental Price
Size matters, but more than size – condition. Is your unit well-maintained? Is it attractive and welcoming to new tenants?
We just talked about how you cannot necessarily control your location.
But, you have complete control over the condition of your rental unit. 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.
You’ll be able to charge more in rent when you provide a few upgrades. Here are the updates and improvements that we believe will help you set a higher rental price for your New York property:
- Make Some Minor Kitchen Renovations
New York rental apartments and condos have a reputation for small kitchens. 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. Make sure the common areas in your building are attractive and welcoming. These minor investments will not only raise your rent; they’ll also attract better tenants.
What Is Competitive Pricing?
When we talk about pricing your rental in a way that’s competitive, we don’t necessarily mean that you should underprice it. That’s only going to leave money on the table. You won’t earn as much cash flow 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.
If you’d like to hear details on how we price your rental properties in New York, 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 Krieger Property Management.