As a landlord, you might be leaving money on the table with your rental property pricing… Many landlords unknowingly undervalue their rental rates, costing them thousands in lost revenue each year. In this video, we’ll reveal the #1 mistake landlords make with pricing and how you can identify the same mistakes in your portfolio.
Case Study: 4-bed, 1-bath SFR in Aurora, COThe portfolio analysis is run on Property Llama. First, the numbers are showcased as is, followed by the numbers for three scenarios: Should Matt Keep, Refi, or Sell?
Property OverviewMatt owns a single-family rental property in Aurora, Colorado. It’s an older house, built in 1929. Despite its age, the home is decently sized with four bedrooms, though only one bathroom on the main level.
Over the years, Matt has tried marketing this property towards Section 8 tenants, given the 4-bedroom layout despite having just one bathroom. He describes it as a “workhorse” rental—nothing fancy, but a solid cash-flowing asset. However, the neighborhood leaves something to be desired. The property is located half a block off Colfax Ave in an area rough around the edges.
He currently values the property at $400,000, a significant increase from the $89,000 purchase price he paid when he acquired it in 2010. Matt’s remaining mortgage balance is $244,000, which means his loan-to-value ratio is 61%.
For now, Matt has taken advantage of the equity build-up by refinancing previously. His current mortgage interest rate is 3.25%. After a recent market rent analysis, he has adjusted the monthly rent from $2,150 up to $2,365 to keep it well-priced compared to similar properties.
Scenario #1- Keep the PropertyThe biggest mistake landlords make is under-marketing their rental properties, resulting in rents below actual market value. Factors like long-term tenants or rapidly rising area rents can cause your pricing to lag behind comparable rentals. Regular rental pricing analysis is crucial for maximizing your investment returns. Even raising rents a few hundred dollars can substantially improve your cash flow, ROI, and cap rate.
After updating the rents to $2365, Matt’s cash flow increased from $107.59 to $264.54.
Next, we ran the numbers on a cash-out refinance to pull out equity and reinvest in a new property:
The final scenario explored selling the rental property entirely. However, two factors made this unattractive:
After reviewing all scenarios, the keep scenario was the “least-worst” choice until conditions improve for a refinance or sale. But, as Matt’s case study shows, regular rental pricing analysis is crucial for maximizing investment returns. Even raising rates a few hundred dollars can substantially improve cash flow, ROI, and cap rate.
Make Smart Decisions with Portfolio Analysis SoftwareTo stay on top of your portfolio returns, it’s best to regularly check in on your portfolio and leverage portfolio management tools such as Property Llama.
Property Llama allows you to analyze your investments’ performance, run scenarios, and optimize your portfolio for better returns.
(01:30) Current Rental Performance
(07:05) Scenario 1 of Keep the Property
(16:45) Scenario 2: Refinance the Property
(19:10) Scenario 3: Sell the Property
(21:35) Final Decision: Comparing All 3 Scenarios
Investing in New Build Townhomes in Denver: the Pros and Cons
From Losing Money to Cashflowing by Restructuring a Loan
Reaching $10K in NOI through 10 Years of Investing
Internal Rate of Return: Calculating Annual Expected Return
Denver Real Estate MLS Market Stats – May 2021
Should I Sell My Rental? An Analysis of 4 Rental Properties and Two Types of 1031 Exchanges
Transitioning from First to Second House Hack
Stocks vs Real Estate and 2 House Hack Deal Analyses
Should I Airbnb my property? Looking at the same property with four different lenses
Drinks and Deep Dives: Comparing 15% vs 20% vs 25% downpayment Options – Which is best?
#281: Drinks and Deep Dives with Chris Lopez - April Market Update, Colorado Springs 8 Unit Multi Family and Office Space Deal Analyses
House Hack Mastermind #7 – The “Nitty-Gritty” of House Hacking and Nomading
Deal Analysis – It’s All About Your Mindset: House Hack in Arvada
Job Postings: Asset Manager and Controller – VareCo
Denver Real Estate MLS Market Stats – March 2021 + Did Tenants Make March Rent?
Job Postings: Transaction Coordinator and Director of Agent Operations with Envision Advisors
Deal Analysis – First Time House Hack in a Historic Denver Home with an ADU
House Hacking In Denver for Less than $5,000 Down (Not a VA Loan!)
House Hacking Over a 7 Year Period with $50K Initial Investment toward $96K Net Operating Income
House Hacking with an Engineer: Finding Joy in the Numbers – Even After Buying a New Build Townhome
Create your
podcast in
minutes
It is Free
The emPOWERed Half Hour
U.S Property Podcast
Aligned Money Show
Dubai Property Podcast
The Ramsey Show
The Clark Howard Podcast