One of the biggest challenges that landlords face is how to determine the rent price of their property.
Not only will this number affect your profits – but it’ll also influence the types of renters you attract.
For instance, pricing your rental property too high may result in a lack of interest – leaving it sitting on the market for a longer period.
On the flip side, a low rental price may attract more interest and give you plenty of great tenants to choose from – but will result in less profit.
It’s no wonder why landlords are left scratching their heads when it comes to pricing their rental properties.
Hence, today we’re going to go over three crucial tips that’ll help you come up with the perfect rental price to help you maximize your earnings!
Utilize a Real Estate Professional
When you’re unsure about what to charge for rent, a real estate professional can always guide you in the right direction.
Not only are they well-versed in the real estate market; they have access to resources that the average renter can’t access.
One of these resources is called a Multiple Listing Services (MLS). An MLS is a private database that provides valuable data regarding the market in specific locations.
It’s important to consult a real estate professional that is well-versed in the location of your rental property. It’s also important to find one that is experienced with rental properties.
The real estate professional will likely consider both personal and market-related factors. Some of these factors may include:
- Your ideal profit margins
- The goals you have for your rental property
- How long your rental has been vacant
- The condition of your rental property
- What similar homes are renting for
One of the biggest perks to using a real estate professional is that they’ll do the dirty work for you. Simply answer a few questions and they’ll have you a realistic number that’ll be appropriate for the market whistle meeting your needs.
Set Rent Based on The Value of Your Home
Although setting rent may seem like a complex process – many experts suggest simply basing it on the value of your home. The general consensus is to set your monthly rent at 0.8% to 1.1% of your home’s value.
Therefore, if your home is valued at $250,000, you’d aim for a rent price of somewhere between $2,000 and $2,750.
Of course, this method has its limitations. For instance, you’re not accounting for other factors such as location, quality of nearby schools, local restaurants and amenities, etc.
However, this simple calculation can easily lead you in the right direction when deciding what to charge for rent.
Use an Online Calculator
Fortunately, there’s plenty of online resources that can assist you in pricing your rental property.
One of the most valuable resources you can utilize is an online rental calculator.
You will be asked a variety of questions such as:
- Upfront costs (purchase price, renovations, closing costs)
- Ongoing costs (taxes, insurance, maintenance/repairs, association fees, management fees)
- Returns (monthly cash flow, cap rate, annual yield)
Once you enter these figures, you’ll be able to get a pretty good idea of your ROI. You’ll get a complete breakdown of your total expenses, earnings, and profits. You can play around with the numbers and determine a rent price that meets your expectations.
How to Determine Rent Price for Your Property
Determining what to charge for rent can feel like a shot in the dark.
However, when you take advantage of the numerous resources available, figuring out how to determine rent price is simple!
Some of the best tips to help you determine rent price include online calculators, real estate professionals, and basing it on your home's value.
With these tips, we hope you can come up with a rental price that is both appropriate and meets your goals!
If you found this guide helpful, be sure to check out our numerous other guides that’ll make you a better landlord!