Many people in the real estate investment industry are either overcharging or undercharging for rent. Therefore, as a landlord, how do you go about determining the appropriate rental price? This is an important question many rental property owners have since it’s a big determinant in your overall success. Not only do fair prices generate a profit but they also attract quality tenants.
Therefore, to set a fixed price you must first understand the factors that influence rental costs. Let’s get started.
The following factors can greatly affect what you can charge renters at your property.
If you’ve spent lots of time and money upgrading and maintaining your property then you can likely charge more for rent. Most tenants are willing to pay more for a nicer property that’s been taken care of. This indicates to renters that there will be fewer problems to encounter, such as pests, water leaks, rot, and so forth.
If you have desirable amenities located on your property then you can typically charge your tenants higher rent prices. For instance, an outdoor entertainment area with a pool, playground, fire pit, or patio can attract potential renters to your property.
The average rent price varies depending on the area you live in. As they always say, location, location, location! That’s why many metro areas tend to have a higher population density which creates an increased demand for housing. You’ll want to examine your property’s location in proximity to restaurants, shops, grocery stores, gas, and entertainment. Being in a convenient location will make your property more desirable, which in turn justifies a higher rent price.
It would be a good idea to research the average rent price of a property similar to yours in the area. This will give you a good ballpark figure.
When you own a property, you’re responsible for the following expenses: insurance, maintenance, utilities, taxes, and so forth. If you don’t generate enough income from your rental, you could be left with a large financial burden. Therefore, you need to make sure that the amount you charge is sufficient to cover all of your financial obligations. To generate a profit you’ll need to be left with a substantial amount once your monthly expenses are covered to make the endeavor worthwhile.
If the amount you’re charging includes utilities then you can probably get away with charging a higher rental price. Your utilities typically include water, cable, internet, electricity, and more.
Besides the factors mentioned above, how much you can charge for rent largely depends on the state you reside in. Some states have rent control laws in place to prevent landlords from drastically increasing their prices.
The following locations have rent control laws:
Keep in mind, the average rent will vary from city to city. Check with a local relator on whether or not the city your property is located in has rent control. If so, you’ll need to know the restrictions before setting your rent prices.
If you’re unsure what’s reasonable in regards to rent, seek assistance from a local real estate agent. They can do research and compare your property to similar ones in the area. There are also many helpful online tools you can utilize such as Zillow’s Rent Estimate.