Maybe you’re wondering if the rental price for your rental property is set at the right amount, or perhaps you’re recalculating your rental rates after keeping them the same for years.
It’s important to understand how much you can rent your house for and the factors that influence how much rent you can receive.
What Influences Your Rental Price
A general guideline states that you should charge between 0.8 and 1 percent of the home’s value for the monthly rental rate, but this is not a firm rule, as other factors will affect how much you should ultimately charge for rent.
If your home is valued at around $100,000 or slightly higher than $100,000, you’ll likely want to charge a rental rate that’s around 1 percent of its value.
However, if you’re renting out a more expensive property, you’ll likely want to charge a rate that’s less than 1 percent of your property’s value to make sure it’s affordable for potential renters.
Each rental market is unique, but here are some general factors that can influence your final rental price.
Rental Prices in Your Area
The rental prices for other rental properties in your area will influence how much you should price your rental at. You want to price your rental competitively to maximize your earnings.
Visit websites that advertise other local rentals to see how your competitors are pricing their rentals. This will give you an idea of what’s considered a reasonable rate for your area.
When exploring competitors’ rental rates, look for properties that are similar to yours in condition and type. A three-bedroom home will command a higher rental price than a three-bedroom apartment in most areas.
Having multiple bathrooms or storage spaces (like a garage, basement, or attic) that your tenant can use to maximize the property’s square footage will also permit a higher rental price. A rental that includes amenities, like access to a neighborhood pool or fitness center, will also command a higher rental rate.
The Condition of Your Property
A property that’s been renovated and has a lot of upgrades will command a higher rental price than a property that needs a lot of work or appears old and dilapidated. Renters are more likely to pay a premium rental rate for a property that appears like-new.
Keep in mind any unique features that your rental has when deciding where to set the price. Items like a sunroom, outdoor kitchen, recreation space, or pool will allow for a higher rental price.
Whether Any Utilities are Included in the Rental Price
Depending on the area, a rental price may include the cost of some utilities, like trash removal, water, internet, or cable. If your rental price is intended to include any of these items, you can usually command a higher rental price.
While some tenants may prefer to have their utilities separate (especially discretionary items like cable TV or internet service), in general, including the cost of some utilities makes it more convenient for a renter to live in your property and helps it appear like a budget-friendly alternative.
Your Personal Financial Needs
When deciding how to price your rental property, you’ll need to make sure that your rental price covers your financial obligations for the property. You’ll want your rent to cover your property expenses so that you at least break even.
Even if your rate results in a low profit or breaking even after your expenses, your property will still appreciate in value while you pay the mortgage down, improving your financial situation and overall net worth.
Check your local jurisdiction’s laws to see if any regulations will influence your rental pricing.
Tools to Help You Set Your Rent
If you still need guidance setting your rental prices, there are tools available to assist you with establishing your property’s rental rate.
There are online calculators you can use to assist you with setting your rental prices. While these online calculators aren’t completely accurate, they can provide you with a generalized rental price for your property.
Another option is to meet with a real estate expert who can offer insight about a suitable rental price for your property. They have access to a wealth of data about rental rates for comparable properties in your area that will help them make accurate pricing suggestions.
You’ll want to locate an experienced, reputable agent who has experience handling properties in your property’s area. Interview a few candidates to make sure you find someone you’re comfortable with.
A more hands-off method is to hire a rental company to handle the logistics associated with renting your property. This includes setting the rental price for your property, dealing with any tenant issues, and assisting with the eviction process for non-paying tenants.
However, rental companies will require a fee for their services that’s usually equivalent to 10 to 12 percent of your rental’s price, cutting into your profits. If you decide to go this route, ask for references and read any online reviews.
Other Guidelines for Pricing Your Rental
When renting your property, you want to find a qualified renter as quickly as possible to minimize your carrying costs.
It’s essential to make sure that your rental is priced appropriately as soon as you advertise it for rent; otherwise, the property may seem too expensive to potential renters and remain unoccupied.
If you’re willing to offer your property as a short-term rental, this can also help you obtain a higher monthly rental rate. The downside to this is that you may have to find a new tenant after a couple of months.