Accurately pricing your rental property is crucial to attracting the right tenants and maximizing profits. Setting the right price can be challenging, but by following a few simple steps, you can ensure that you get the most out of your investment.
Know your market
The first step is to research your market. Examine supply and demand for the rental properties in your area – if demand is low, but supply is high, you may need to price your rental a bit lower to be competitive. It would be best to do a comparable market analysis of nearby properties to understand how to price your rental. Don’t go based on this number alone, but it’s a great starting point. You can find this information by researching online and looking at various rental listings. You can also pull this information from your MLS or use software such as the Rental Beast CMA tool to compare properties and their pricing.
Consider your property’s unique features
Once you understand the rental market in your area, think about your rental property’s unique features and amenities that may increase the rent’s value. What makes your property stand out from others in the area? Do you have any amenities that other properties don’t have? Do you have upgraded kitchen and laundry applicants? Do you have good parking options for the tenants? Highlighting these features can help you attract tenants and set your property apart from others, so it’s essential you factor them into the rent price.
Factor in costs
Next, you must factor in all the costs of owning and maintaining a rental property. Calculate all the expenses, including mortgage payments, taxes, insurance, repairs, and maintenance. Once you know how much it costs to operationalize your rental, you can determine the minimum rent you need to charge to cover them. Remember that if you have more than one property, this can impact the minimum amount of rent depending on your financing for each property. For example, if you have two rental properties but only one has a mortgage, your minimum amount may change for both because the rent of the mortgage-free house goes further. You should also decide if you want to include utilities in the price.
Set a competitive price
After you’ve researched the area, done a comparative market analysis, assessed your property’s features, and determined the minimum amount of rent, you can set your price. Once you have that rental price in hand, do one more check of the area and see how it compares to the rest of the neighborhood. If it’s significantly higher than the average in that area, consider adjusting it to be more competitive. Consider offering incentives, such as a lower security deposit or a free month’s rent, to attract tenants.