Are you not sure how much to charge rate for a rental property? It is important to recognize that choosing a rental rate that is profitable for your property and competitively priced to attract suitable renters is the first step toward success.
Choosing the right rental rate might be difficult. While you might be tempted to be proactive and rate a big premium for your apartment compared to other similar units in the area, doing so could result in long-term vacancies. Setting the rent too low, on the other hand, will affect your bottom line.
We’ve bought, flipped, and rented out many properties in Springfield over the years at Cornerstone Home buying. And we thought we’d take a moment to share some of the most important factors to consider when setting the rental price.
Why is it important to charge reasonable rent?
Before we go into the details of what constitutes a fair rental fee, it’s worth noting why it’s critical to get the price right:
It assists you in finding suitable tenants and being paid on time.
Remember that if your rates are too low for your location and property, you may not be able to find the right tenant. If your prices are too costly, you may have difficulty finding tenants, and you risk losing money each month. As a landlord, your objective is to locate the sweet spot for fair market rent, not too expensive, not too low.
Consider the average household income in the area where your property is located. You should set your rental rate to attract renters with similar salaries so you can fill your space quickly and worry less about being paid on time.
It assists you in paying off your mortgage and other living expenses.
Your property is an investment, and if your rental income isn’t enough to pay all of your property’s expenses, you haven’t selected a suitable rental rate. It assists you in increasing your rental profit. Setting the proper rental pricing rate could mean maximizing earnings. According to the balance, landlords may be able to keep zero to six percent of their monthly rental money in their pockets.
How Much Rent Should I Charge?
Setting the correct rental rate is obvious, but determining what to charge tenants is more difficult before settling on the best rental rate for your house, with several aspects to consider.
Understand the Competition
It would be best to see at market comps in your immediate neighborhood to establish what to charge for the rental rate. Find out how much other landlords charge for similar properties and use that as a starting point. Then, based on what you learn, change the rate of your rental.
Another point of reference is the US Department of Housing and Urban Development’s annual fair market value estimates (HUD).
When looking at what other landlords in your region are charging, look for rental units with similar characteristics to yours, such as size, neighborhood or location, and property condition.
The 2% Rule is Only a Recommendation.
Some landlords are familiar with the 2 rule, which states that the monthly rental rate should be between 1% and 2% of the property’s worth. However, remember that this is just a hard estimate of our future rental rate. It’s not a replacement for looking up nearby comparable flats and comparing rents. Furthermore, property values have risen faster in rent years than rent prices, so his calculation could be inaccurate.
Amenities and Location
Is the rental rate in a high-demand location? Is it in a less attractive neighborhood? What is the demand for the specific type of property? A higher rental rate suggests more demand. What features do you have that add to the perceived worth of your property? A pool? Nearby parks? Is there an excellent school right across the street? Any more questions? In your promotion, make sure to emphasize facilities!
Setting the appropriate rental pricing rate is only one aspect of running a successful rental company. Landlords must use a tenant screening service like this to minimize long-term vacancies, late rent payments, and unnecessary property damage.
Hope that helps!
If you or someone you know is looking to sell your home as-is for cash, give Cornerstone Homebuying a call at 413-315-9551. We can close in as little as two weeks and make you a fair cash offer within 48 hours!