When considering listing your rental property, one of the first questions you’re going to want to answer will be “for how much?” It’s an important question. Set the price too high and you might fail to get any interest, and at the very least you’re likely to have high vacancy rates over the course of several years. Set the price too low and you’re leaving money on the table that you could use to improve your property. It’s also important to consider that the market will change over time, so your price will have to be adjusted regularly. So how do you decide on the ideal rate? Here are 5 helpful tips to set the ideal rental price for your property.
1. Find your ballpark figure
To find a very rough estimate as a starting point, you could set the rent at $1 per square foot. For example, if your property is 1,000 square feet, you could start with an estimated rent of $1000/month. From here, you could compare this number with the prices similar properties are renting for nearby – for example using rentometer.com. Bear in mind this is not going to be your final value, but more of a good first guess. You also need to decide from the outset whether to include utilities, or to expect tenants to cover these. With soaring summer power bills, it might make sense to lower the rent and leave utilities out, however in doing so you may risk delinquent tenants failing to pay bills.
2. Consider size and location
Location is perhaps the most important factor to consider. The same sized property can rent for widely different rates depending on the neighborhood it is placed in. That’s why it’s very important to be aware of the market in your location. You’ll want to know what similar properties in your area are renting for, and also how long it’s taking those properties to rent. Size is the next biggest factor. Make sure you’re comparing your property to those with a similar square-footage and similar features (number of bedrooms and bathrooms etc.)
3. Research the local market
One factor you should take into consideration is the median income of residents in your area – a statistic you should be able to find online. A potential tenant’s income determines their purchasing power. Ideally, a tenant should make at least twice as much as they pay in rent. If you’re charging considerably more than a local resident can afford, you may need to rethink your numbers. Another consideration is lease term – do you want to make your price flexible and allow tenants to negotiate a lower price for a longer lease term? This may be well worth doing in order to incur lower vacancy rates. Lastly, you need to be aware of any recent trends in the local rental market.
4. Take account of the small details.
.Firstly, is your property furnished or unfurnished? You should be able to charge a little more if your property is move-in ready. Secondly, what does your exterior look like? Is there a big yard or swimming pool? Is the landscaping well taken care of? Is there a garage or decent parking? These considerations might warrant a small increase or discount. Similarly, are there internal features that a tenant might be prepared to pay more for – for example large closets, hardwood floors, or a basement? Finally, what will your policy be regarding pets? It’s important that you are very specific when dictating which pets may or may not be permitted, and what the additional cost or security deposit will be, if any.
5. Consult a professional
A professional property manager or realtor makes their living by accurate judging property prices. They know how to get your property rented, and how to attract the best tenants. Consulting a professional may save you time, hassle and money, and is likely to help you get your property rented much faster. Additionally, a property manager can help you advertise your property, screen potential tenants, craft a water-tight lease agreement, and if necessary handle all the administration and maintenance involved in ongoing tenant management. In many cases, the money saved more than covers the fee! Many companies will also take care of finding tenants and writing the lease agreement for a flat fee with no monthly commitment. It’s well worth checking out what services are available in your area.
If you have questions about property management or want to find out whether a professional property manager could be right for you, we would love to hear from you! Please contact Trisha at email@example.com or call Peebles Property Management on (530) 370-9188.