Charging the right rent is key to running a successful investment business. However, new landlords lacking property management knowledge or experience might find themselves overcharging or undercharging tenants for rent.
When you overcharge tenants, you risk making your rental property seem less desirable to prospective tenants. When you undercharge them, you might have a hard time covering your expenses or earning an income.
In this article, we’ll discuss how to charge the right amount for rent. With the right pricing, you can maximize your rental income while maintaining your rental property’s desirability for prospective renters.
Use a Formula.
The ‘1% rule’ formula calculates the expected rental price based on the value of a rental property. If your property is worth $100,000 for example, you need to charge at least $1000 ($100,000X1/100) for rent.
The formula is just a guideline however, as you might need to factor in a few things. When determining your rent price, consider factoring in nearby amenities, design features and your property’s location.
Another important factor worth considering when it comes to rental pricing is the desirability of a rental market. If your property is located in a competitive rental market, you might need to price it a bit lower for it to be competitive. In such a case, it might not meet the 1% rule.
Compare Your Property to Others in the Area.
Another way to determine the rent for your Fairhope rental property is to do research on comparable units. You might consider interviewing landlords renting similar units or doing research online.
For best results, make sure to compare your Fairhope rental property to units that have similar features. We suggest the units be in the same area as your rental home, have similar amenities, the same number of bedrooms and bathrooms and a similar square footage.
Determine Rent Using Square Footage.
If you’re not able to find similar units to compare your property to, you can also use the square footage of your rental unit to determine the rental price. This should help you compare your property to others, no matter their size.
Suppose, for instance, that your Fairhope rental property has a size of 1,500 sq. ft., and that nearby 1,000 sq. ft. units are renting out for $250 more. To know how much rent to charge, you’ll simply need to determine the price per square foot, then multiply by the total size of your home.
Consider Other Factors that Might Impact the Rental Price.
The following are key factors that will definitely have an impact on how much rent you can charge.
Property Location.
This is arguably the factor that will have the greatest impact on how much you can charge tenants to rent your property. For many prospective renters, property location is a deciding factor when it comes to choosing an apartment to rent.
Families with young children, for example, will consider renting properties near schools. Students will most likely consider locations near their schools. Career-driven people will also want to rent units that are nearby their places of work.
Amenities.
Amenities are another important factor that might determine how much rent you charge. Certain amenities bring certain conveniences, which might make your rental property more desirable.
Examples of high-value amenities include security and safety measures, outdoor spaces, parking spaces, stainless steel appliances and granite countertops.
Appliances are another thing that tenants prioritize when looking to rent a unit. If your unit includes a microwave, washer and dryer, refrigerator or dishwasher, you can charge a higher price for rent. Consider renovating your property or installing new appliances to charge a higher rent.
Current Economic Conditions.
Current economic conditions also affect how you price your rental property. If the economy is underperforming, you might not be able to charge a high rental price. You might also need to avoid raising your rent, as renters might be struggling financially.
If the economy is doing great however, you might be able to charge higher rent prices since demand might be high.
Type of Lease.
As a landlord, you can choose whatever type of lease you’d like in order to meet your investment goals. Are you looking to rent out your property on a short-term or long-term basis? While both options have their pros and cons, renting out your property as a vacation rental can help you charge a higher rental price.
Property Features.
No two homes are the same. Two properties, for instance, might share the same square footage but have different types of appliances.
Even similar units in an apartment building will be different in terms of desirability. Apartments on top floors usually charge higher rent prices because of the views. Take note of any unique features your investment property has and consider factoring them in when pricing your rent.
For example, a feature that might impact your rental’s desirability is storage space. A home with ample storage spaces is more desirable than one without, especially if you’re targeting families. Aside from storage space, other desirable features include wi-fi and air conditioning.
Hire a Property Management Company.
Hiring an experienced property management company is another effective way of determining the best rental price to charge. When you work with qualified property managers, you’re able to tap into their rental pricing experience and market knowledge.
A good property management company will have years of experience in the local property market and will have tried-and-tested strategies to help you determine the best rental price for optimum return on investment.
They can also help you market your property, screen prospective tenants, repair and maintain your property and handle all the paperwork, among other things.
In A Nutshell: Setting a Rental Price for Your Fairhope Property.
Pricing your Fairhope rental property correctly is key to running a profitable rental business. The right price will help you maximize your return on investment (ROI) without lowering your property’s desirability.
For expert help, partner with Level Property Management Group. Our team of knowledgeable and experienced property managers will help you handle all aspects of managing your Fairhope rental property.
Contact us today by phone at (251) 210-1664 or email leads@levelpmg.com. Our property managers are ready to offer you a free rental analysis and answer any questions about our services.
