Income is earned through rental homes for many investors across the U.S. As more young people enter the rental market, the rent prices should continue to rise in most cities. Investors who search for a high cap rate rental home often take into account the average rent paid in a specific region. This list of the highest rent cities in 2015 should help a person who is determining where to invest this year.
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1. San Jose ($1800+)
2. San Francisco ($1598)
3. Washington, DC ($1428)
4. Los Angeles, CA ($1308)
5. Jacksonville, FL ($1200)
6. Metro New Jersey ($1228)
7. Seattle, WA ($1154)
8. Miami, FL ($1127)
9. Riverside, CA ($1075)
10. Austin, TX ($1000+)
11. Portland, OR ($977)
12. Orlando, FL ($931)
A person who buys a home to flip usually calculates the price of rent based on neighborhood market share. A loan taken out for 7 years to pay for a rental home would likely be calculated into the amount charged to a tenant for rent. Property management plays a large role in the increase or decrease of rental prices.
Good managers know how to spot market trends and always consider economic factors in rental neighborhoods. While booming markets like Austin and San Jose experience annual growth, this growth does not always translate into higher rental income. The role of the property manager is the maximize the return on investment for a property owner and is a full-time job.
Some landlords or property managers have the ability to raise prices for rent paid by tenants based on their own needs. It is not uncommon to find rental increases of 20 percent or more in some areas. One of the best methods used by a manager to continue earning rental income for an investor is to provide long-term lease arrangements. This method locks a renter in for a period of two to three years at a price that is comfortable.
The general rule that most investors swear by in the rental industry is to raise rent prices 3 to 5 percent annually. This can be effective although neighborhood crowding should always be taken into consideration. When there are too many homes to rent, rental prices will likely be lower based on the shortage of renters. Finding the balance between average market rent and an annual increase is a trusted strategy.