Chicago has the highest rental prices in the midwest, with the average 2-bedroom apartment coming in at over $2,600 per month.
If you're looking to get in on the booming Chicago rental market, you'll need to take the property valuation process seriously. Performing an accurate real estate valuation before you purchase an investment property will help you maximize your rental income.
There are plenty of misconceptions about rental property pricing. In today's post, we'll explain some of the biggest myths and give you some tips for performing a rental valuation. Keep reading and optimize your investments in 2024.
You Can Set Any Price You Want
New landlords often enter the market thinking that they can set any price that they want. While this is technically true, setting a rental price that is out of line with market conditions is going to make it hard to fill vacancies. Rent prices are dictated by demand, not by the needs of individual landlords.
The reason you perform a property assessment before you purchase a property is to get a sense of how much rental income you can make. Rental valuations primarily look at the surrounding rental market.
To determine how much you should be charging, you need to look at other similar properties in your neighborhood. Units of similar size with the same number of bedrooms in the same area are the best indicator of what you'll be able to charge.
Higher Rent Prices Mean Higher Rental Income
A lot of investors naively think that higher rent prices directly lead to higher rental income. This couldn't be further from the truth.
As mentioned above, your rent should be dictated by market conditions and what you're offering. By setting rent prices too high, you're shrinking your pool of potential renters. Nothing hurts rental income more than vacancies.
In reality, your best bet is to set competitive rent prices. This will bring more interest from apartment seekers.
When you have a large pool of applicants, you can use tenant screening to find the perfect tenant. Keeping great tenants in your rentals keeps vacancy rates low and maximizes your rental income.
You Should Increase Rent Whenever Possible
In Illinois, unlike other states, there's no cap on how much landlords can raise rent. The law does state, however, that you cannot raise rent for retaliatory or discriminatory reasons.
All of that said, you shouldn't arbitrarily raise your rent prices. If you decide to raise rent, there should be strong logic behind it that your tenant will accept. Raising rent beyond a reasonable amount will alienate your tenants and cause them to seek housing elsewhere.
Use a Rental Valuation for Good
Performing a rental valuation is the best way to determine rent prices. When you keep your rent prices in line with Chicago's market, you'll be able to find great tenants to help you maximize your ROI.
It can be a lot of challenging work to properly evaluate an investment property. If you need help, a property management company is your best bet.
At Chicago Style, we help Chicago-based investors, landlords, and tenants live the best possible lives. We have a deep understanding of Chicago's real estate and rental markets, so contact us today to get help with your rental valuation.
