6 Factors to Consider for Setting Rental Prices
It can always be a challenge to set the perfect price for your rental unit(s). There are a number of factors you need to consider. You don’t want to price it too high and limit your pool of potential tenants. You don’t want to price it too low and lose out on profitability. Like Goldilocks, you want to find the rent price that is “just right.” Here are 6 of the factors you need to consider when setting rental prices.
Of course, the location of the property will help dictate a fair rental price. It’s ideal to have desirable neighborhood with good amenities, low crime rates, convenient location and high rent prices at other comparable properties. Definitely research other rental rates around your unit to help determine your optimal price range.
2. Type of Property
New construction properties will usually be more desirable for renters than older apartment buildings and homes. Single-family homes will also command more attention and higher prices than multi-family units.
3. Floor Plan
The floor plan of the property will also make a difference. How many square feet is the unit? How many bedrooms and bathrooms are there? Does it feel spacious or cramped? Is there a private yard, balcony or patio? These are all factors that will affect rental prices.
Look at the amenities of the neighborhood and of the property itself. Is there a swimming pool, gym or other shared spaces for tenants? Does the unit have its own washer/dryer or hookups? Are the kitchen appliances relatively new? Is there air conditioning or central heating? Is there a nice view from the home? Is there an enclosed garage, reserved carport parking space and/or ample storage room? All of these can add value and desirability for your rental.
Naturally, the condition of the property will impact how much you can charge to rent it out. It’s a smart idea to invest some of your own money on renovations, repairs and upgrades before renting out the unit. This is a good way to increase what rental prices you’re able to charge.
Lastly, you have to calculate your ownership expenses for your rental property. Understand how much money you will need to collect in rent each month in order to cover your costs, and ideally, make a tidy profit over time. Here are a few expenses to consider:
- Mortgage Payments
- Property Taxes
- Maintenance & Repairs
- HOA Dues
- Advertising Costs
- Property Management Fees
- Legal Fees
All of these factors should be reviewed in order to set the best rental price that gives you dependable profitability without turning away good tenants. You will also want to revisit your rent prices each year. Even if your tenants are in multi-year leases, it’s important to understand the market and periodically recalculate your costs. When it is time to raise the rent or bring in new tenants, you’ll know what you should charge. Sometimes, you have to make the trade-off and collect a little less to keep a good tenant in your unit. Collecting the highest possible rent isn’t always the best plan. Great tenants aren’t always easy to find!
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