Transcript: Hi there! So if you’re watching this you’re likely trying to set rents for your property, or possibly looking to invest in a rental property. Whether you own, manage or are investing in one rental property or hundreds of rental units across the country, you need to be able to set fair market rents confidently. If your rent is set too high, it can sit on the market and you’ll miss out on monthly rental income.
And if the rent is set lower than the competition, you’ll leave money on the table. So to make things easy for people looking to set rents, we’ve compiled 5 things you can do to make sure you're setting the right rent amount. So, let’s get started. As we all know, rents vary greatly from market to market, a two bedroom apartment in downtown Manhattan is going to run higher than a two bedroom garden style apartment outside Charlotte, NC And to bring it down to a local level, rents can even vary within a specific neighborhood.
Obviously, many variables can impact the rent you can charge including: location, type of building (duplex, apt. building, etc.), square footage, amenities (like pools, roof decks, etc.), how old the building is, # of beds/baths, etc. and there are other factors to consider like state of the economy, location within a certain neighborhood, is it a college town?, etc. So, you can see that setting rents can take a little finesse, and you should consider a few resources. Let’s dig into our 5 tips.
First, stay up to date on the economic and business activity in the local market (i.e. Is it thriving? Are stores closing down?). Economic activity is one of the key drivers of rental housing demand and it can impact the rental market in unique ways. For example: Take the market in Boston.
The current economy is hot, rental housing is in high demand – and this is leading many renters to forgo amenities and perks in favor of just securing a lease. In this market, landlords can afford to make less concessions when negotiating, and many times even increase their rents. So – make sure you have a feel for the local economy.
Second, on our list is to find some rent comp data. Check local apartment listings using the local newspaper, use online apartment guides, or websites like Craigslist or Rentometer to get a feel for the “going rents”. Rentometer is a great site to get a good baseline idea for rents in an area, so many people like to use it as a starting point.
Next up. Make sure to chat with a local real estate professional about their take on the market or a specific neighborhood. Local experts like property managers, brokers, agents, appraisers, and even lenders are especially good at identifying the drivers of housing supply and demand unique to your market. They’ll know more about jobs, local ordinances, building permits, zoning for a new apartment building, etc. So, basically, try and find a local person who knows the “lay of the land” to give you the inside scoop.
Our 4th tip seems basic, but make sure to use “rent per square foot” whenever possible as a benchmark. This allows you to encapsulate into a single number all the subjective variables of rent and provides you a basis for comparison across different units, locations, and amenities. Some rent data sights will have this data. For example, you can see that Rentometer reports offer dollar by square foot for all their rental listing comps which make things really easy when comparing properties.
Our last recommendation for something you can do to make sure you’re setting the right rents, is to check your local apartment or rental housing association for research and other information they may provide about local rent levels. They’ll often have historical data and future forecasts. This is especially important for the real estate investors and developers out there. It never hurts to join a local apartment association or real estate group so you can start building local contacts in the business as well. So there you have it….a few things to consider to help you set rents more confidently. Setting rents can be as much of an art as it is a science.
However as we’ve illustrated, with good current and historical rental data and a thorough understanding of the local market and market conditions, you can feel like you’ve done your homework – and feel confident that your rent is fair. Thanks for joining us today. This has been a production of Rentometer.com We really do love all things rental data. You can learn more about us at www.rentometer.com.