No matter your motivation for renting your property, as a landlord you want to obtain the highest rental income possible. However, be realistic! If you wish to fill your rental vacancies quickly it vital that you do the research and establish a fair rental rate that is competitive with other established rental rates in your local neighborhood for similar properties.
As a landlord, establishing the right rate at which to market your rental property can be quite challenging. If you select a rent rate too low, it will cost you income over the life of the lease. If you set the rent rate too high, you are unlikely to attract a long-term tenant.
Several different components enter into the rent rate equation including:
- Has your property been recently renovated with modern appliances and comfort features?
- Are you close to public transportation?
- Does your vacancy have amenities that are not typically found in your type of rental property such as a fireplace, outdoor grill, swimming pool, spa, gym, or pet facilities?
- Is your rental property in a gated community? What security and safety features do you offer?
- Is your rental close to schools, shopping, and recreational opportunities?
- Is your property non-smoking? Is your property adults only or do you rent to families with small children?
- What is your pet policy?
- What makes your property stand out from all the rest of the neighborhood available rentals?
What is the market demand? Market demand is one of the crucial factors when setting a rental rate. If you are in a busy area with a high demand for rental property, a landlord can establish the rental rate for whatever amount the market will bear.
If you are in an area of economic downturn, high unemployment, and the market is saturated with residential vacancies and homes for sale, you may not be able to rent the property for whatever amount you had in mind. A knowledgeable and experienced residential property manager can provide an accurate picture of the market so that you can make a sound and verified decision when it comes to setting the rate on your rental property.
If you are a new landlord, without experience or knowledge of your community’s rental properties, there are several things you can do to learn about the local rental market including:
- Search local billboards and message exchange centers for fliers for properties for rent in your vacancy’s neighborhood.
- Read the newspaper and check-out the rentals listed in online marketing sites or the phone directory.
- Don’t just read competitor advertising. It is essential to make an onsite visit if you are trying to compare your rental with another to establish a rental rate.
The best advice is to engage the services of an experienced property manager. Your property manager has all the tools and technology to run a comparative analysis on all rentals in your area: both leased and available for rent. Your property manager will guide you in setting a realistic rental rate that will attract the “ideal” long-term tenant: one that is clean, quiet, respects your property and pays their rent on time.
If you are attempting to market the rental yourself, you can get a general idea of market conditions by assuming the role of a prospective renter yourself. Respond to rental advertisements in local fliers, newspapers, and on neighbor signs and billboards. Check out the rentals advertised on Craigslist and other local community online billboards. Visit the properties and see how they compare with your vacancy. Visit social media sites, local community billboards, flyers, and campus newspapers to find rental properties similar to yours. Learn how other landlords attract, screen and qualify potential tenants.
As you visit and review comparable properties, note the presence of, or lack of amenities, offered by your rental.
- Do you provide a garage or is there a charge for off-street parking?
- Do you offer onsite storage space?
- Do you require an additional deposit for pets?
What are the terms of the leases offered on comparative rentals? Keep in mind that if you are trying to sell the property while renting, you are best negotiating a month-to-month lease rate rather than a six-month or annual lease.
If that seems like a lot of work and a lot of wasted time, you are right: it is! By engaging the services of a reputable property manager, you can enjoy all the financial benefits of property investment without the headaches, hassles, and demands on your time that doing it yourself would entail.
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Using state-of-the-art technology and tools, a knowledgeable and experienced property manager will perform a market analysis and provide a comparative guide to all rentals, occupied or available, in your area. Setting the right rental rate can keep you from making a costly mistake and becoming locked into a rental rate that is substantially less than one, that if the property is marketed and managed correctly, could support.
What Is The Rental Income Goal Your Are Trying To Reach?
Before you can determine how much to charge for your rental property, you will want to evaluate the expenses that would be offset by the rental income.
- How much is your mortgage payment?
- What are the annual property taxes?
- What is the current condition of the property?
- Are repairs or renovation required before the property will be ready to rent?
- How much is your property and liability insurance annually?
- What is the projected annual maintenance cost?
To attract the ideal tenant, you may want to be flexible and offer an incentive or set a rental rate slightly below competitive properties. You will not know if this a feasible option unless you are aware of all of your projected expenses and what tax benefits are available to you as a landlord. Your property manager can help you evaluate your property and help you locate and retain a desirable long-term tenant: one that pays their rent on time and gets along well with the neighbors.
Keep in mind, that once established, the rental rate you quote to one prospective tenant must be precisely the same as what you offer to others that inquire. In other words, you cannot name a rent amount that is meant to discriminate to avoid renting to anyone that otherwise qualifies.
You can use a reputable property manager to:
- Evaluate the rental
- Help establish a rental rate
- Market the property
- Screen and qualify tenants
- Show the property
- Execute the lease agreement
- Collect the rent
- Account for all expenses
- Respond to tenant issues
- Maintain and manage the property
A property manager will keep you legal and in compliance with the Fair Housing Act and The Fair Credit Reporting Act, so you rid yourself of the work of property investment and gain the peace of mind that your investment property is in good hands and producing the best possible return on investment.
Your property manager makes money when you make money. It is their job to keep your occupancy rate high and your maintenance fees low. Call today. Let your property manager do their job. They will get the job done, and done quickly and you can stop worrying about setting a rental rate and all the other sundry chores involved in managing your investment property.
Topics: property management, Rent Rates, Landlord Tips
As a top producing Realtor and Property Manager; Terry specializes in sales, extensive construction homes, rentals, REO’s, short sales, and all aspects of Real Estate. After graduating the University of Michigan with a master in MBA, Terry continued his endeavor and now has over 15+ years of experience in the Real Estate world. If there is anything that has to do with Real Estate and sales, you can always be sure of Terry to provide important, specialized knowledge.
