Setting the right rent can be one of the most difficult
areas for many people who are investing in rental property. If your property
rents out in no time, it could be an indication that you are not charging
enough rent. On the other hand, if your property seems to take a long time to
rent out, it could be a clear indication that your rent is too high. So, how do
you go about setting a rental rate that is in line with the current market?
One of the best places to start is the newspaper. It is
imperative that you do some local research to find out what kinds of prices are
driving the local market. Location is the most important factor in determining
rental rates. For example, a three bedroom, one bath home in one part of town
may rent for a $800 a month while another property on the opposite side of town
may only be able to draw $550 per month. Most prospective tenants look for
convenience when searching for a rental property. They are either looking for a
location that is near their work or close to their children’s schools.
Neighborhoods that are considered to be trendy or hip can also be a driving
factor, as many people like the idea of living in certain neighborhoods.
Of course, the budget of the renter will also play a role
in determining how much they are willing to pay and can pay in rent. Due to the
fact that most renters have needs that must be filled, especially in terms of
space, it is quite common for square footage to also play a role in determining
rental rates. This means that larger homes and units will typically be able to
rent for rates that are higher than smaller homes and units.
When setting rental rates; however, it is also important to
keep in mind that there is a certain point when rental rates can reach a cap.
When interest rates are low, if rental rates rise too high, renters will
quickly make the connection that it just does not make sense to rent any longer
when it could be less expensive to buy a home.
It is also important to keep in mind that basic amenities
can also play a role in determining how much rent you can charge for your unit
or apartment. Some of the basics expected by most prospective tenants include
off street parking, running water, washer and dryer hookups, dishwashers, etc.
If these basic amenities are not available, you may find that you need to
either offer something else that would attract prospective tenants or lower
your rental rate.
