Did you know that the average cost of rent in the United States is around $1,200 per month?
Rent is at an all-time high and is predicted to continue increasing in the coming years. If you own a rental property, this is great news for you.
Owning a rental property is a difficult task because you don’t want to charge too much for rent, but you also don’t want to charge too little.
Do you know how to set rental price? Keep reading to learn about 9 factors that determine how to set the rent rate for your property.
1. Property Value
One of the first considerations to make when setting rent is the property value. Generally speaking, your rent should be around 0.8% to 1.1% of the total property value.
For example, if your property is worth $150,000, you can expect to charge between $1,200 and $1,650 per month. For properties of higher value, charge on the higher end of that range. For lower value properties, it’s best to stick near the .8% range.
While this will give you an ideal rent range, it shouldn’t be the only consideration you make when setting a rent price.
If you are wondering how to set rent, you also need to consider the size of your rental property. For example, you can rent a large, 3-bedroom apartment for a lot more money than you can rent a studio apartment.
If your rental property is near a college campus, you can consider setting a rent price per room. This will allow you to make more money if your rental property has several bedrooms.
Location is one of the biggest factors that will determine how much you can charge for rent. What city is your rental property in? Is it located in a desirable neighborhood?
The median rent for a tiny studio apartment in Manhatten costs around $2,700 per month. That same studio apartment in other parts of the United States could cost as little as $600 per month.
If your rental property is in a city, you can charge more for rent because there will be more demand and the added convenience of renters being close to their jobs. If you offer home rentals in the country, you may need to go with a lower rent rate.
One of the best ways to determine how much you should charge based on location is to look at other rental properties near you. Look for properties in the same neighborhood, similar sizes, and similar amenities. How much are they charging for rent?
4. Lease Term
What type of lease terms do you plan to offer? Renters expect to save money by signing a longer lease. If you want to attract more potential renters, you can do so by offering discounted rent for longer lease terms.
Longer leases are more beneficial for you because you won’t have an empty unit as often, you won’t have to find tenants as often, and you won’t have to pay extra administrative fees, such as background checks.
If you are willing to offer short-term leases or month-to-month leases, you should consider charging more for rent. This will cover extra costs and incentivize renters to choose a longer lease.
5. Average Income
What is the average income in the area of your rental property? When determining your rental price, you need to make sure that renters can afford to live there.
If you live in a city with a high income, you can charge more for rent. If you live in the country and charge a lot for rent, the locals may not be able to afford it.
Before setting your rental price, take a look at the average income. Most renters aren’t willing to pay more than 25% of their monthly income on rent.
6. Is the Apartment Furnished?
If you are considering renting your apartment with furniture in it, you can charge more money for rent. While many renters prefer to use their own furniture, some renters don’t have furniture and don’t want to buy any.
Because having a furnished apartment is convenient, renters are willing to pay more. Make sure you have insurance for your furniture to cover any damages. You also can require renters to have their own renters insurance before moving in.
7. Apartment Exterior
Did you know that the exterior of your apartment building can play a role in how much rent you can charge? If your apartment has nice landscaping, renters will pay more in comparison to apartments with trash out front.
You can charge more based on the type of building. If the rental is in a brand new high-rise building, you can charge more for rent than an apartment with an exterior entrance on the ground level.
When setting a rental price, amenities are an important consideration. If you allow renters to use a pool, you have to consider the cost of pool maintenance. If you have an on-site gym, you have to include the cost of sanitizing the gym.
Renters will be willing to pay more rent for a property that has these amenities. It saves them money if they don’t have to pay extra for a gym membership or a community swimming pool.
9. Do You Allow Pets?
Do you plan to allow renters to have pets in the rental property? If so, you can charge more for rent. You can choose to set a higher rent price for those with pets, or keep the same rent price and require an extra monthly fee.
If you allow pets, having a dog park, dog washing station, and other pet amenities will allow you to raise the price of rent even more.
Now You Know How to Set Rental Price
Owning a rental property is a great side hustle or way to make a full-time income. If you are deciding how to set a rental price, be sure to keep these factors in mind. The most important are property value, location, and size.
Did you enjoy reading this article on determining rental price? If you did, check out the property category for more advice on owning property!