Learn more about which factors you should consider before selecting a price
Understanding how much to charge tenants for rent can make or break the success of your rental properties. If you overcharge, you can run the risk of scaring off good tenants and having a high vacancy rate. If you set your price too low, you can potentially attract irresponsible tenants and receive little to no ROI.
As a general rule of thumb, many property owners follow the 1% rule. This rule states that owners should charge tenants at least 1% of the property’s value. The 1% rule is a good guideline to follow, however, there are also other factors to consider when pricing your rentals.
Continue reading to explore some factors on how to price a rental property.
If your property is located in a desirable neighborhood, this will typically allow you to charge a higher rent. Prospective tenants look for rental properties that are in a safe area, are part of a good school district, and near grocery stores and parks.
Also, if your rental property is located in a growing city or neighborhood, this will also affect your rental rates. With more people moving to your property’s city, there will be more competition for vacant units.
#2: Square Footage/Amenities
The size of your rental property matters when determining a monthly rate to charge your tenants. A larger unit and/or a unit with a greater number of bedrooms and bathrooms will allow you to set a higher rate.
Tenants are willing to pay more for a rental that has access to many apartment and community amenities such as an in-unit washer and dryer, a modernized kitchen, a fitness center, clubhouse, and a pool.
#3: Know your competition
Before you set your rental rate, it’s important that you closely look at what other properties are charging their tenants. Identify properties with similar amenities and with units of the same size. Define what is a reasonable price that will stand up against competition as well as watching out for price trends so that you can possibly raise your prices in the future.
Depending on where your investment property is located, it is important to check rental control laws for that specific area. Be sure to check for any changes in the market, including your competitors. If you have any competitors that offer similar amenities, see how much they are charging.
While researching how much you should charge, analyze how much you should charge for late payments as well. Late fees are typically structured as either a flat rate or a daily rate. Keep in mind that it’s important to have some level of flexibility to maintain a healthy landlord-tenant relationship.
If you would prefer to avoid the hassle of pricing your property or figuring out how to attract good tenants, hire a professional property management team to do the work for you.
The rental price of your investment can either attract good tenants or bad ones. Understanding how to price your property can make your real estate business successful. Examine your property and your competitors to know which price works for you.
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With our free rental analysis, our team compares your current rental costs by performing a detailed income and expenses analysis. You’ll learn how to set the best rental price, how your property compares to others on the market, and more.
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