Your property is completely ready to rent. Now you have the question: How much rent should I charge?
Rent will vary depending on many different factors. We’ve broken it down into a few different categories to consider.
Step 1: Compare Your Property To Similar Rentals Online
The first thing you should do when trying to figure out how much rent to charge is hop on craigslist, zillow, or apartment finder and compare your unit to others listed there. This is a great way to get an idea what the market in your area is charging.
Comparing your unit to other properties in your area is a great start, but this is simply the first step to get a ballpark figure. To really maximize the potential of your rental revenue, the list below has several other factors that can affect how much rent you can charge.
Things that can affect how much rent you should charge:
- Amount of Rooms
- Other Factors
It’s obvious, but rental properties in bigger cities are going to cost more. A rental in Los Angeles can charge several thousand for a 3 bedroom home, but a rental in a Midwest town might only charge a thousand. Each city and town will have it’s own market.
That being said, the location within the city itself will make a difference as well. If your rental is in a downtown area it usually will rent for more. People will pay for the convenience of being near their favorite restaurants and shops in the heart of the city. Generally the closer your rental is to epicenter of your city, the more it will rent for.
If your rental is on the outskirts of the city, you might have to charge less to get it filled. Renters will accept having to drive farther to reach the places they do business but only if the cost is adjusted to make sense with the commute. People will not pay top dollar if they are have to drive farther than usual.
This is a major factor in how much you should charge in rent. When comparing other rental units online, try and find a property in the similar location to yours and see what they are charging.
Amenities Definition: “any feature that provides comfort, convenience, or pleasure”
Your Rental Property will be judged by potential renters on the amenities it offers.
Does it have a washer and dryer for your tenants to use in the unit? Does it have a dishwasher? New appliances? All of these can factor in to how much rent you will charge.
Make sure to be tactical with the amenities you add to your rental units. Sometimes the cost does not match the value of the unit. Try and use modest upgrades to your lower quality buildings, and save the expensive upgrades for your newer and high end units.
Compare the amenities your rental offers with other units online to find the correct price range to charge.
The interior quality of your rental will affect the amount of rent you can charge.
A rental that has a new kitchen back splash and counter tops can rent for considerably more each month than an otherwise similar unit with no upgrades.
Other things that can charge more rent for would be new flooring, upgraded bathrooms, a fenced in backyard, a deck, and more.
Be careful with renovations to increase rent on your rental property. There will be a certain point where you can OVER renovate a rental.
For example, A rental unit with small rooms can only be improved so much. Small sized bedrooms makes it basically impossible to charge more rent, even with marble counter tops and crown molding on the ceilings.
Similarly, An old building with a decked out interior will not pay for itself if the area around it is a lower value. Make your upgrades affordable and relative to the value of the building.
The quality of your rental interior should be taken into consideration when trying to figure out how much rent to charge.
This is similar to factoring in location, but slightly different.
What does the rest of your neighborhood look like? You can have a beautiful building that has completely been renovated but will struggle to charge more rent because the surrounding buildings are worn down.
Is there crime in the area? This will affect the amount of rent you can charge as well, no matter how nice the building is.
Locations near schools tend to rent for slightly higher than average because the neighborhoods are generally well maintained. Rentals near schools are generally safe to live in and are good places to raise a family.
Compare your rental to others in the area if you can and find out what tenants are willing to pay to live there.
Smaller sized units can be difficult to rent for more, even if the interior is completely renovated. Sometimes it is hard to find actual room sizes online when comparing apartments, but do your best.
Usually there is one room bigger than the others in a unit. Make sure to recognize that when comparing your prices.
Units with bigger rooms are much easier to charge higher rent in.
Are you worried that the rooms in your 3 bedroom are too small? There is the option to remove a wall and turn it into a 2 bedroom instead. This can actually allow you to increase rent in some cases by making a master bedroom twice as big. This isn’t always the best option, but it is something to consider.
Amount of Rooms
Generally, the more rooms your rental has the more you can charge for rent. This isn’t always the case but more often than not it’s a good rule of thumb.
Let’s say there is a rental home with an unfinished basement. A similar sized home with a finished basement should rent for more because there is more usable space in the home.
Same goes for apartments with an extra sun room. Even though the square footage is the same, there is more usable space.
The amount of rooms is a factor you should compare against other rental units in the area to determine the best rent price you can get.
This part of the list just includes several small things to take into consideration when calculating how much rent you will charge.
- Will you be paying the utilities or will the tenant? Utilities can really add up over the course of a year. Offering to pay for the water and sewage will make a big difference by the end of the lease term, so make sure to include this in your rent calculations.
- Do you offer cable/internet? This value can add up to a few hundred extra a month. Cable companies can offer reduced rates for package deals, so this might be worth considering. It’s possible to charge more rent by offering this service to your tenants.
- If it’s a multiplex, are there common areas such as a gym or a swimming pool? Maintenance costs for these extra perks should be factored in to how much rent you charge the tenant.
Final Thoughts On Deciding How Much Rent Should I Charge
It’s easier than it’s ever been to find out how much rent to charge. With many online places to view apartment listings, it’s as simple as doing a quick search in your neighborhood to compare your rental to others. Just keep the above tips in mind when doing your search and you can find out exactly what to charge your tenants.
Remember, the market will ultimately decide how much rent to charge. If you have decided on a price and the unit has not rented out after a few weeks, there are several options to consider.
Before you lower your rent price, make sure you are building your listings correctly. Poor advertising will keep your rental vacant. It might not be the price, it might be that not enough people are seeing your listing.
The last resort would be to lower your asking price. It all depends on how your rental compares to others in the area.
As long as you aren’t greedy and are basing your price off of the rest of the area, you should get your rental filled in no time!
Check out some other posts that can help you get your rental unit filled!