In the real estate rental business, charging the right price for your property can make the difference between success and failure. Charging too little can eliminate the profit potential while charging too much might make the property unattractive to potential tenants.
If you’re not sure what to charge for rent, here are some factors you’ll need to take into account.
1. Competition Helps Determine How Much Rent to Charge
See what other landlords are charging for homes and apartments that match your properties in terms of amenities and size.
One way is to check the rental listings on Craigslist. You can also go over your local newspaper. Both of these will help you determine the going rent in your area.
2. Amenities Help Choose the Proper Rent
The rent you charge shouldn’t be standard unless the units are similar. Make sure you charge rent based on how desirable the unit is. As a guide, you should set the rent based on the following factors:
- Square Footage. A 700 square foot one bedroom is obviously less desirable than a 1,000 square foot one bedroom.
- View. Apartments with beautiful views are more appealing than those without.
- Layout. Apartments with a railroad style are less desirable than those with other layouts.
- Updates. Units with hardwood floors, updated appliances, and other amenities are more desirable than those without.
- Floor Level. Apartments with raised floors are more appealing.
Other things that tenants often look out for include:
- Balcony or similar spaces
- Safe Parking
- Generous, clean space with roomy cupboards
- Good, safe location
- Modern bathrooms and kitchens
- Plumbing for wet surfaces
- A shower option
3. Diamonds are Forever, Rent Isn’t
The rental market is dynamic. What you charge now won't be the same as what you’ll charge later. As such, you must constantly look at the market and adjust the rent accordingly. For example, the demand may spike in the summer because families are trying to move before the beginning of a new school year.
Likewise, when the economy is bad, the demand for rentals may skyrocket, as people may no longer be able to afford homes.
As a general rule, when there’s less demand, lower the rent. When there’s a greater demand, charge a higher rent. Try to keep your tenants in mind when increasing rent. Dealing with an eviction is never a fun process. It's important you find a rental amount that's suitable for both you and your tenants.
4. The Right Rent is Attractive to Tenants
How many calls are you receiving on advertised properties? If you receive fewer calls, you may need to lower the rent prices. On the other hand, if you receive many calls on properties advertised, you may need to adjust the rent prices upwards.
Keep in mind that prospective clients may not want to see your property if your apartment does not have the amenities or location to back up the higher rent. They might also assume that something is wrong with your property if your rental is priced too low for the area.
It goes without saying that you’ll need to find the perfect price point in order to succeed as a landlord.
5. The Proper Rent Price is Profitable
The rent price you charge should be enough to cover all of your expenses for the property. For you to be profitable as a landlord, the rent should cover:
- Vacancy costs;
- Repairs and maintenance on the property, and;
- Your mortgage payment, if you have one.
6. A Proper Marketing Strategy Moves Emotions
It shouldn’t be surprising that, just like any other purchasing decision, tenant’s decisions are almost always driven by emotions. Knowing how best to leverage emotions can help you profit from your property as much as possible.
So how do you achieve this? Simple. Make sure that your marketing strategy is done properly. You’ll want to have a well-written description. You’ll also want to have great pictures of the property. This strategy alone has the potential to attract mobs of great tenants.
Evidently, there are various factors that landlords need to take into perspective when considering the right rent for their properties.
Before you set the price, be sure that you have calculated your return on investment. Remember to factor in expenses such as property taxes and insurance, interest, and mortgage loan principal in the rent price.
About the Author: Stephen Fox is the co-founder of Upkeep Media, an online marketing agency that specializes in working with the real estate industry. When he isn't learning about the latest marketing techniques, he spends his time hanging out with his family and playing basketball. If you would like to connect with him, follow him on LinkedIn.
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