Categories Property Management

What to consider when setting the monthly rent for your investment property

Renting out a property is one of the key factors in determining profitability.

Renting a property requires a delicate balance between generating an income and maintaining a competitive rate. It also involves attracting tenants. Renters have the option to select from several properties in most rental markets. Setting an appropriate rate can have a direct effect on your ability reduce vacancy rates.

The first rule is to pick a rate that’s comparable to other rental properties near you. It is important to keep in mind that not all rental properties are equal. There must be a good reason for your two-bedroom unit to have a higher rent per month than the apartment next door. Your unit has a beautiful view? Included washer and dryer? Extra storage?

Consider these factors to determine your rental value.

Renting a home? Here are 8 things to consider

  1. Where is it located? You should consider the walkability of your property to determine the value that it can provide for your tenants. Do you live near schools, shopping centers, restaurants or public transport? You may be able to negotiate a higher rental amount if you are close to schools, shopping, restaurants or public transportation. It’s important to consider the quality and safety of your neighborhood, as well as the location. If you own a newly renovated rental home, but it is located in a bad neighborhood, you are unlikely to be able to charge a rental rate higher than the average.
  2. How big is it exactly? Similar to listing your home for sale, the square footage of your house will influence your rental rate. The price per square foot is what tenants will consider to get the most bang for their money. Even if the property has the same number and size of bedrooms, a larger property will likely be more attractive.
  3. What can you see from your rental property? Consider the view of your rental property and whether tenants will find it appealing or not. This is especially important if you’re pricing multiple-unit properties. A view of a garden, city or water is a good reason to increase the rental rate. You may want to adjust the rental rate if your property is in an alley, faces directly into another neighbor’s home, or has no view.
  4. How much space can you have? The value and appeal of rental properties are increased by amenities like extra closets or kitchen cabinets, garages or sheds. Consider offering your tenants extra storage space for a monthly fee if you can.
  5. What is included in the price of appliances? Rents for properties with an in-unit dryer and washer are higher almost everywhere. A dishwasher, microwave, garbage disposal and central air are also desirable appliances. Consider lowering the rent if your tenants are required to provide their own stove, refrigerator or other appliances.
  6. Does it have the latest updates? Your rental property will stand out from other comparable properties if you have updated touches. Fresh paint, new flooring, updated lighting fixtures, and modern appliances will make your rental property stand out and attract a higher rent.
  7. What is included in the price of utilities? When setting your rental rate, you must consider the utilities that are associated with it. Reflect this in the rent price if tenants are responsible for their entire monthly bill. You should reflect this in your monthly rent rate if you will be paying for some or all utilities each month. Even if they pay more, some tenants prefer to have one monthly bill that includes utilities.
  8. What are your “extras?” The amenities are what really set your property apart. Renting out amenities like cable or internet is a good way to increase your rental rate and attract tenants. Fitness centers, pools and shared common areas are also amenities that tenants will pay more for.

You’ll need to do some research and evaluate a number of factors before you can determine a fair rental price. The features that make your rental property more desirable to the competition will ultimately justify a higher rent.

Understanding fair market rent in your area will help you set reasonable expectations, and reduce rental vacancies.

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