How Much Should You Charge for Rent?
Deciding Your Rental Income
The key to landlord success begins with setting a competitive and profitable rental rate. While it is tempting to be aggressive when it comes to charging rent, setting a rental rate that is too high can be just as bad as buying the wrong investment property. Below are a few things to consider when setting your rental to stay competitive and attract that best tenant for your property.
Investigate the Market Rent
The best way to know what to charge for rent is to research the rental price for properties nearby. When investigating the market rent, take into account the following questions.
What are the amenities provided by your rental? Does your rental property have sidewalks, a community pool, and/or transportation options to get to and from school, work, and local restaurants/venues?
How many bedrooms and bathrooms does your rental property have compared to other listings in the area?
Are there any upgrades to your property that others nearby do not have? Kitchen and bathroom upgrades that would make your property more attractive to potential renters.
Does your rental property have a garage or storage space?
What is the livable square footage or the property compared to others in your area?
Use your competition as a baseline to gauge how much you can charge for rent when it comes to your property.
How to Calculate Rent Prices
Rent is determined by the real estate value of your property. The general rule is to charge 1% of the home’s value for rent. For example, if your home is worth $250,000, then it is customary to charge $2,500 for rent. When setting your rent price, make sure to make it competitive and don’t set your price too high for the area, or you will discourage potential renters.
Supply and Demand
Rental income is also determined by both the rental market and the economy. If there are limited rental properties in the area but high demand from renters, it is safe to assume that you can charge slightly more given the “supply and demand.” The demand for rentals also increases when the economy experiences a dip or recession. When the economy is weakened, people have a tendency to rent because they cannot afford to purchase a home.
Check in with a Property Management Company for Help
At Oak City Properties, we have been taking care of rental properties for years! Our full-service property management company will help you find and buy new rental properties to grow and diversify your portfolio. We will also market the property, locate prospective tenants, and show the home to qualified applicants. Once a tenant is placed in your rental property, we will: collect rent payments, assess and collect late payment fees, provide 24/7 maintenance, help with accounting/tax services, and deal with any court appearances in the event of an eviction.
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