Setting the Right Rent Price
Wondering what the ideal rental price might be for your new rentals? If you’re thinking of setting the price to comparable rentals in your neighborhood, you may be losing potential income.
Before you set the rent price for your apartment, condo or house, calculate the long-term value of your decision. In general, it might encourage you to set your asking price higher to get full market value. Hopefully, your rental market analysis has the right number.
However, as we enter 2024, demand and availability have changed some types of rental properties has changed. Single family homes, so in severely low supply in desirable, safe neighborhoods ensures you can can get a reasonable asking price. For the apartment/condo market, a glut of supply is going to present pricing challenges. If you do strong marketing, you’re giving yourself a better chance of doing well in 2024.
Set Rental Price Strategically
Price is a function of your need to pay your bills, mortgage, insurance, HOA fees, and repairs and maintenance. Shorting yourself on revenue could leave you vulnerable to financial pain and even having to sell your property.
Too Low or Too High, Where is that Sweet Spot for Rental Price?
Is there are magical mathematical formula that will keep you happy and ensure your suite enjoys zero vacancy rates? You could multiply your home value x .1% or .05% to arrive at a price and pay off your mortgage in 10 years to 20 years.
$550,000 x .01 = $5500 per month! $220,000 x .005 = $1200 per month. A formula might not help much.
You might improve your foresight on setting the right rent price with a calculator app. See other landlord software apps too.
The Usual Rental Pricing Factors
Typical standard factors which influence rental prices are: the type of unit, floor level, square footage, layout, condition of appliances, number of bedrooms/bathrooms, closet space and parking. Check other landlords ads and see if they’re offering incentives such as free cable, free parking space, or storage as it may indicate the area is very competitive.
Once you get a general ball park figure, you can begin to adjust the asking rental price to suit your circumstances.
Here’s 9 Tips to Help You Get that Ideal Price
- estimate your monthly costs and add 30 to 40% for excellent return
- ask the landlord in the multifamily complex/building the range of rents
- search online via websites that offer apartment searches
- search for rentals on Zillow, Realtor.com for rental prices in that building, zip code or neighborhood
- weigh your unit’s benefit/features vs comparable rentals in the immediate area and adjust your asking price by -20% to +20% depending on how competitive your unit is
- if you’re renting from May to September, there’s higher demand so you can bump it up 10%
- spending $500 or more to advertise? Add 10% to rent because you’re getting better quality tenant prospects
- stay ahead of cost of living increases, add 5% to ensure you’re winning not losing
- in demand neighborhood? Add 10% because of the desirability of your neighborhood going forward into the next 5 years
Pricing Your Rental Well
You can see that pricing is a process of maximizing ROI vs risk and the intersection of supply vs demand driven price levels.
Use the spreadsheet approach so you know what your rental is worth against competing units. Then do some quick testing in your advertising to gauge interest and willingness.
In low vacancy markets, you can afford to be a little more aggressive. With the US rental housing market tight, and mortgage qualification difficulty rising along with high employment and rising wages, you may get a good price.
Additional Rent Pricing Resources
Rentometer: Rentometer provides a comparison of apartments similar to yours and their portfolio Analysis tool is perfect for analyzing a large list of properties/addresses.
Zilpy Rent: Zilpy Rent helps you find the right rental rate by using advanced data mining algorithms that assess property SQFT, crime rate, school ratings and demographics, using similar neighborhood comparable properties.
Eliot for Airbnb: Eliot’s rent estimate uses billions of vacation rental pricing points to predict short-term rental revenue, trends and price surge events.
Here’s to seeing you get your price and acquire a high quality tenant whom you can keep happy. Pricing is just one variable in property management. Take care of all the other areas, and you’ll get your price.
Don’t forget to see our posts on the rental housing market, apartment prices, California housing market, and the best property management apps. As part of a professional, time efficient approach to rental property management, check out ManageCasa. You can test drive it right now.
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