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 $750 a month while another property on the opposite side of town may only be able to draw $500 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.
Another way to make sure that you stay updated on rental rates in your local area is to join a local association for landlords. This is a great way to make sure that you keep your finger on the pulse of the local rental market. Emerging trends in the area will affect not only you but also other landlords as well. For example, if your particular area is in an economic slump or even an economic boom then this could have an effect on local rental rates. Make sure you keep track of whether there have been job losses or the creation of new jobs in your local area.
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, 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.