FAIR RENTAL PRICE – HOW TO CALCULATE

If you are one of those smart landlords who have a strong team of efficient people, you will also have an appraiser. Having an appraiser is a smart move as you will know the actual value of your property, and you will be able to price the rent accurately. However, many landlords are just starting their careers, and they do not know the value of an appraiser so, they are lost at pricing the rent of their property. Here’s a detailed guide of pricing your rent right, and by the time we are through with you, you will be a professional at pricing your rent adequately.

The 1% Rule:

According to the 1% rule, your per month rent should be 0.8% and 1.1% of your rental property’s market value. So if the value of your unit is $100,000, your monthly rent should be somewhere around $800 to $1100.

So, how will you know whether to charge 0.8% and 1.1%? The simplest answer is to charge minimum for cheap properties, whose value is around $100,000 and charge $1.1% for properties whose value is over $100,000.

You must be thinking this is the easiest thing ever; it would have been if there weren’t any other factors to consider while calculating the rent of a rental property.

Factors To Consider While Calculating Rent:

Apart from size, location as well as amenities, there are other major and minor factors to consider while calculating the rent. Here are the factors and how to include them while calculating the rent of your property. This is a crucial step, as the over-priced properties stay more vacant than occupied and cost you money, while under-priced properties cost you adequate cash flow. It’s the perfect catch 22 for a landlord.

Major Factors:

Locality and Whereabouts:

Location, location, location, isn’t that the most important thing when it comes to property? For instance, a one-bedroom unit in San Francisco will cost you $3600 a month, while the same unit in Cleveland will come extremely cheap in $525 per month. The difference isn’t only the sates, and it’s the neighborhood too. A more secure, well maintained, and crime-free neighborhood with schools and parks will cost you more than a rundown neighborhood where crime is high.

Size:

Size matters, the bigger the place is the most you will have to pay, it’s pretty straightforward. So when you are renting the place and fixing a price, make sure you know the going rate of per sqr ft.

Pricing Factors:

Average Income of Residents:

A tenant should earn double rent; this is the basic rule of renting price. As a landlord, you can ignore this rule, but if you are looking to decrease your vacancy rate, you will have to take this into account as this profoundly affects the buying and renting power of the tenants.

Minor Factors:

Furnishing of the house:

We all know that furnished places cost more than unfinished units, maybe not a lot, but furnishing does affect the rent of a unit. So, if your place is ready to move-in will all bells and ribbons, you should definitely charge higher.

Exterior:

The exterior of your house increases the curb appeal, which means you can raise the rent if you have a well-maintained exterior. Also, the surroundings and amenities matter. Whether you have a pool or a back yard matters too, all these are points to increase your rent price. If you haven’t got all of this, you should give a discount to lure in the tenants.

Parking:

Parking or garage space is also a big factor to consider. If your rental unit comes with a proper parking space, you can, by all means, increase the rent. However, if this isn’t the case, the tenant has a point to negotiate the rent.

Pets:

There is an evident difference between with pet tenants and without pet tenants. With pets, there is more wear and tear. With disobedient pets, there is also the matter of damages. So you can raise the rent, or you can ask for a special security deposit for the damage that may incur at the paws of their pets.

Entrance:

Tenants value privacy so, private or public entrance is a significant factor when calculating rent price. A private entrance is more like a privilege that almost all tenants want to have, and they will pay slightly more than the others to get that privilege. So, if you have this Ace in your deck, don’t forget to cash it.

Extra Space:

Any kind of added space, like an attic or a basement, should be counted as separate space and charged accordingly. This is the golden point of your house, so it would be very unwise to let this go when calculating the rent. Built-closets as well as or pantries also come under this category. These are the spaces that can get you extra money; also, if you have a storage or a shed outside of the unit, you can use that to lure in the tenants and get some extra income as well.

Fair Rent:

Even after considering all the factors, you are confused about the actual pricing; you can use an online “rentometer” to land on a number. Jot down all the factors that we have discussed so far and as well as the 1% rule and work with that to get a number. You can also talk to the other landlords in the neighborhood and gauge their strategies to set the rent price.

List It:

Now you know how to set the price according to your strong and weak suits. A steady and actual market price will get you, long term tenants, decreased vacancy rate as well as a stable income. Can you think of something better than a steady income and reasonable tenants for a landlord? Moreover, your fair rent will give you a good name among the renters, and you will find that this quality will get you the most responsible and loyal tenants.

If you’d like to talk more about property management, or you need help with Everest Property Management, please contact us at Everest Realty.

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