Stop Guessing Rent Prices: Using Discretionary Income to Optimize Rental Revenue
Summary
This article discusses using tenants' discretionary income, calculated from median income, debt, and cost of living, to determine the affordability of rent increases. Hosts can use this information, along with WDSuite's Tenant Credit Insights tool, to make informed decisions about rent adjustments and improve property value.
Key Insights
- •A good rule of thumb in the industry is that housing costs should not exceed 30% of gross income.
- •By analyzing median household income, monthly debt payments, and local cost of living, you can calculate how much cash tenants realistically have left over, which will tell you if there is room to support higher rents.
Action Items
- ✓When increasing rent, pair it with something tenants can see or feel, such as an appliance upgrade or improved maintenance response times.Effort: lowImpact: medium
- ✓Use WDSuite's Tenant Credit Insights to gather real-time tenant and neighborhood data to set rents that are profitable and sustainable.Effort: lowImpact: medium
Tools & Resources
- →WDSuite: WDSuite is a free tool for analyzing tenant income and credit data.
Common Mistakes
- ⚠The article suggests the majority of landlords only consider the rent-to-income ratio, overlooking essential costs like utilities, groceries, and transportation.
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Curated by Learn STR by GoStudioM