Deciding how to price your rental can be an intimidating and difficult process, especially for new landlords. If you set your price too high, you risk receiving any offers at all, while setting a price too low could forfeit any profit. Here are some tips to help you determine a good middle ground when setting your rental price:
1. Be aware of competition
A great place to start when deciding what to charge for rent is to observe what others are charging for similar properties in your area. Online tools like Rentometer can help you uncover more in depth information about these properties to find rentals with the most comparable features. Websites like Craigslit and Trulia are great to browse for other local properties, as well. From there, you can alter your rate more specifically to accommodate other benefits or disadvantages.
2. Keep up with market trends
The rental market is constantly changing, so it is critical to pay attention and stay up to date with latest trends. For example, according to Apartment List, 25 percent of renters who start their search in July will move in the next 30 days, whereas 22 percent more of renters who start in January will take more than 90 days to move. If you are listing a property in the winter months you may consider starting with a less ambitious price.
3. Consider the 1% rule
It is common for landlords to charge 1-2% of the property’s value, but it’s important to note that is just a baseline for the tentative rental price. While it’s not a bad starting place, there are many other factors to consider. According to Realator.Com, home prices continue to rise faster than rent, so the 1% rule may not be a reliable estimate much longer.
4. Know local rent control laws
While considering a potential rent price, it is essential to be aware of any local laws limiting the amount of rent that can be charged and the amount rent can increase each year. Although increasingly harder to come by, these laws vary city-by-city and are enacted in Washington D.C., New York, New Jersey, California, Maryland, and Oregon.
5. Account for amenities
Tenants are willing to pay more for certain features that may set your property apart from other listings. Consider what your rental has to offer when determining how to price your rent. Features like walkability to local services, in-home appliances, ample parking, outdoor areas, and safe and secure communities can be prime factors that renters view at a higher value.
6. Don’t underestimate maintenance and repairs
Although there is no way to foresee exact costs, it is a general rule to account for 1% of your properties value to be used for maintenance. It’s important to keep your rental in good condition, and neglecting repairs for too long can make for a much bigger mess. Making sure you set aside maintenance funds within your rental price is imperative for maintaining a profit. Other things to consider when estimating cost of repairs would be the age, condition, and type of property you are leasing.
7. Learn from experienced landlords
Setting the right rental price is going to be a learning experience that you don’t have to jump into blindly. Utilize networks of landlords, like BiggerPockets, and get advice from those who started out just like you. Learn from others’ mistakes and lease your property quickly and at its worth.