Property manager rent fee suggestion to low?

Question

I am going to have my first rental property by June 1 and met with a property manager. I need $2,200 to cover my mortgage/HOA fee. She says 1 bed, 1 bath condos start at 1,800 a month and says to be honest a lot of people in Hawaii are negative in their returns since its so expensive. A comparable unit in my condo rented last year at $2,000. And a two bed rented for $2,300. Yet I have a coworker who is renting a 420 sq foot studio for $2,375 a month plus $80 for electricity not far from where I live. She also lacks a dishwasher, balcony, no view, no in unit washer/dryer and no guest parking. What would you rent my condo out given this information?

Drew Sygit · Answer

Account Closed How is what you need to cover your mortgage & HOA have anything to do with what a tenant will be willing to pay?

Ask your agent for the comparables that support their $1800 recommendation.

You can also check Zillow yourself. Enter your property address and then click "Back to Search" in upper left corner to get to map view around your property.

Switch to For Rent and enter beds & baths and Home Type. Under More you can enter square footage and whatever else applies.

Then you can see the rental competition on the maket.

Just note that these have asking rent amounts, NOT FINAL rent amounts that may have been negotiated lower.

Nathan Gesner · Answer

I hear this a lot from owners.

"I can rent my place for $2,400 a month. Why are you quoting me $2,200?"

Sometimes, a private landlord is patient and can get a higher price. Sometimes, they just get lucky. Sometimes, the devil is in the details and the deal isn't really as good as it sounds.

As an experienced manager, I know what the market will support to find a quality renter who will pay on time, take care of the home, and stay for at least the term of their lease. If you want a higher price, it comes with the risk of a longer vacancy, a tenant who can't afford the rent, a tenant who breaks the lease to move to something cheaper, etc.

Even if you could rent it for $2,200 a month, it probably won't cover your expenses. You must pay management fees, maintenance, taxes, insurance, and other expenses, such as vacancies.

Drew Sygit · Answer

Account Closed sigh...

The "market" doesn't care what your costs are. Tenants will only pay market rental rates.

You are making a mistake that many newbies make - which will actually cost you MORE in the long run:(

Every month your property sits vacant you lose over 8% of your annual income (1/12 months = 8.3%)

So, which is a better business decision:

1) Taking 5-10% less in monthly rent to avoid 1-2 months of vacancy lossesOR2) Holding out to find that 5% of the rental population that may pay more than market rent, but losing 8% each month?

Account Closed · Answer

@Drew Sygit

Hey, I totally get where you’re coming from and appreciate the breakdown—it’s a solid reminder about how vacancy eats into returns.

But just to clarify, my initial question was whether my property manager was pricing the unit too low. And after speaking with one of the more experienced managers in their office, I felt validated—they actually suggested a rent higher than I was expecting. So this isn’t just a “newbie mistake”—I’m basing my number on what the unit offers and direct feedback from within the same management team.

I don’t think you’re seeing the full picture of what I’m asking here. I’m starting strong based on comps and guidance, but I’m not stuck on the number—I’m watching the response closely and will adjust if needed.

Also, to be real, I wouldn’t even be converting this to a rental if I wasn’t confident it could cover the HOA and mortgage. I’m not trying to get greedy—I’m just trying to make sure it pencils out responsibly

Theresa Harris · Answer

I'd talk to another PM and see what they say.  PM normally have a good idea of what places rent for in the area, but they often want to see the place rented, so may low ball the rent price.  The difference to them between it renting for $2200 or $1800 isn't a lot ($40 a month if they take 10%), but to you it is.  alternatively you may be looking at the higher end rents and that is what you are comparing it to.  Talk to the PM and ask how they came up with that price and go through some of the units you currently see on the market.

Bill B. · Answer

If you don’t trust this PM go with a different one, you’re hiring them to be the expert. If you know more than them move on.

OTH:  if you hold out one more month to get $2,000, instead of $1,800. You’ll collect $24,000 instead of $21,600. But... you’ll make one more payment with no tenant. ($2,100), and if you’re paying 8% PM fee you’ll lose another $192 to the PM on the higher rent. So unless your utilities are under $100 you’ll actually lose money.

I’ve seen people excited they got their higher rent after 2-3 months of vacancy. Not realizing that’s a 16% loss of rents. They’d have been better off 10% lower.  your payment has NOTHING to do with the rent you can charge. If you refinance and your payment goes down $200/mo are you going to lower their rent?

Colleen F. · Answer

Account Closed aside from talking to more than one PM run your numbers for your rental. You can look on zillow and other places to see what has been listed and how long it was up, assuming shorter time listed usually means rented. Set yourself up for alerts on properties coming up for rent.  Make sure you compare yourself to similar properties with the same amenities.  Does season matter?  Here rentals starting in the winter almost always get lower rate due to less demand.  Furnished units may rent for more so make sure your condo in your complex wasn't a furnished  month to month rental.  And of course your costs don't matter in the price of rent, it is whatever the market says.

Account Closed · Answer

@Drew Sygit I don't think its wise to start renting a property that is below what my mortgage/HOA fee. I know I should be able to break even in Hawaii's market.

Account Closed · Answer

I don't think its wise to start renting a property that is below what my mortgage/HOA fee. I know I should be able to break even in Hawaii's market.

Account Closed · Answer

@Nathan Gesner Yes. I understand the additional fees for the PM, repairs, but don't want to start with a rental fee that is lower than my mortgage/HOA fees.

Property manager rent fee suggestion to low?

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