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When managing a rental property, you’ll need to regularly adjust your rent price to remain competitive and fair for your area, as well as cover rising costs of rental property ownership. But it’s important to know what factors and laws to consider if your state limits how much rent can increase per year.
We outline when landlords can (and can’t) raise rent, how much rent should increase per year, and how to determine a new rent price.
When Can a Landlord Raise Rent?
Landlords can raise the rent price when presenting lease renewal options, month-to-month leases, or when searching for a new tenant. However, some states place rent increase limitations that can influence how much you can raise rent by, especially if renting to tenants that receive housing assistance or Section 8 vouchers.
States may also require you to provide a Rent Increase Notice informing tenants on how much rent will increase once the lease term ends. For that reason, it’s advised to refer to local landlord-tenant laws before changing the rent price.
When Can a Landlord Not Raise Rent?
Depending on the state, there may be instances where you cannot raise rent. Examples of scenarios that do not allow landlords to raise rent are the following:
- The new rent price would exceed the threshold listed in rent control laws for your state
- An existing fixed-term lease has not expired
- You did not provide a Rent Increase Notice when presenting lease renewal options
- Your lease agreement states the rent price will not increase if renewed for another term
- Your property is considered a rent-controlled property
- The rent increase is in retaliation of your tenant
- The rent increase is construed as discriminatory and violates the Fair Housing Act
How Much Can Rent Be Raised?
The amount rent can be raised each year will depend on your state, so first refer to your local landlord-tenant laws. But according to the latest findings in our Quarterly Landlord and Renter survey, nearly half (45.8%) of landlords expect to raise rent anywhere from 5% to 10% to cover the rising cost of rental property ownership.
While it’s common for landlords to increase rent each year, it’s important to consider local ordinances, seasonality, local rental comps, and the current state of the rental market to avoid increasing the price too much. So even if some landlords increase their price by a certain percentage each year, it’s advised to determine what’s best for your rental.
How to Determine New Rent Price for Your Rental
If your state allows landlords to increase rent without any restrictions, the next step is determining your new rent price will be for your rental. Here are three steps to guide you along the process.
1. Review Your Operating Expenses
Calculate the total amount of your operating expenses each month to see how much you need in rent to avoid paying them out of pocket. Operating expenses consist of costs that impact the day-to-day operations of your rental business. Examples include your mortgage, property taxes, Homeowners Association (HOA) fees, utilities, depreciation, landlord software fees, and more.
This number can also serve as a guide to determine how much you need to generate a profit and cover your expenses each month.
2. Consider the Current Condition of the Rental Market
The rental market is constantly changing, which is why it’s important to stay informed on recent changes to rent prices and how it’s impacting tenants. Our latest Quarterly Rental Market report found that nearly three-quarters (72.9%) of renters that saw their rent increase since moving into their current residence are considering moving to a more affordable residence. If you’re finding yourself in a similar situation, then it may be worth limiting how much you increase your rent to avoid driving away good tenants or long vacancy periods.
On the other hand, if you find the local demand for rentals has recently increased, then this can give you more room to increase your rent price.
3. Research Local Rental Comps
Researching local rental comps can help you see what other landlords are charging in rent for similar properties. You can manually search apartment hunting websites to go through individual rental listings or invest in the Avail Rent Analysis report to get comprehensive insights on local rent comps, rental benchmarks, rent trends, and more in minutes.
Seeing what other landlords are charging can provide a benchmark as to what the average rent price is for similar properties. You can then decide if you want to charge more or less than the average rent price, depending on what you think is best.
How to Communicate Rent Increases to Tenants
When planning to increase rent, it’s important to provide a Rent Increase Notice to inform your tenants on changes to rent. Some states also require landlords to provide a notice within a certain timeframe to avoid breaking local landlord-tenant laws. In addition to providing a notice, you can also contact your tenants directly to get their feedback on the new changes.
What to Do If Tenant Negotiates New Rent Price
It’s common for tenants to negotiate the new rent price, especially if they’re hoping to renew the lease for another term. It’s your decision whether or not the price can be negotiated, but allowing tenants to negotiate can establish good landlord-tenant relationships and result in an agreement both parties are happy with.
However, if you do not want to alter the new rent price, then the tenants will need to notify you if they accept the new price or will move out once the lease expires.
Streamline Rent Collection With Avail
Knowing how much to increase your rent price per year can make it easier to determine new rent prices for your rentals. By referring to local landlord-tenant laws and comprehensive reporting on local rental comps, you can increase your rent price while still remaining fair and competitive.
Create an account today to purchase a Rent Analysis report for your rentals and collect online rent payments with Avail.
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Determining a fair rent price that’s also competitive for your area can be challenging as a first-time landlord. But using rental comps, short for rental comparables, can help you set a rent price that’s profitable and appealing to tenants.
In this article, we show you how to find rental comps for your rental property and how to value your property based on your rent price.
What Are Rental Comps?
Rental comps are used to compare your rental property with nearby properties that have a similar square footage, number of bedrooms and bathrooms, property type, and current rent price. They can also be used to determine a competitive and fair rent price for your property based on information from other local rental properties.
Properties vary in the apartment amenities they offer, which can influence how much rent a landlord can charge. By curating a list of local rental comps, it’ll be easier to see how much you can charge in rent based on what your property offers tenants.
Where to Find Rental Comps
In the past, landlords would have to spend hours researching local rental listings to see how much others are charging for similar rentals. There are now easier and quicker methods to find rental comps near you, like the following:
- Avail Rent Analysis Report: The Avail Rent Analysis report is a six-page report that provides rental comps for 10 nearby properties with similar characteristics to your rental. You can also get valuable information on rental demand throughout the year and rental benchmarks.
- Top Rental Sites: Sites like Realtor.com® and Zillow include millions of rental listings that can provide insights on how much landlords near you are charging for rent, as well as the amenities they offer and pictures of the property. If you find that your property offers more than local rentals, this can give you leverage to charge more in rent.
- Facebook Marketplace: More and more landlords are advertising their rental listing on Facebook Marketplace to find tenants. While it may not include as many listings as other rental sites, there is still valuable information on local rent prices.
Pro tip: Want to save on the Avail Rent Analysis report? Invite a fellow landlord to create an account on Avail to earn $50 in account credit.
How to Value Your Rental Property
The goal of a rental property business is to generate income through rent payments and other rental fees. Since investment properties can vary in value, it’s important to determine the value of your rental property early on.
1. Calculate Fair Market Value
A property’s fair market value is usually determined during the homebuying process, but there are still ways to calculate this once you officially own the property. If you used a Realtor to find your investment property, then they may be able to help you prepare a comparative market analysis (CMA) from the MLS.
You can also estimate the fair market value by calculating the price per square foot or by having an appraiser determine the property’s valuation.
2. Determine Operating Expenses
In order to make a profit from your rental properties, your rent price should be high enough to help cover operating expenses, but not so high that you lose tenant interest. Operating expenses usually consist of mortgage payments, property taxes, maintenance repairs, apartment turnover expenses, and landlord insurance.
Costs can vary depending on where your property is located, so you’ll want to have an estimate of your total costs before determining a rent price.
3. Calculate Fair Market Rent Price
After curating a list of rental comps, you can use them to help you determine how much to charge in rent. Your rent price should also consider seasonality, the value of your amenities, operating costs, and current events that can impact the rental industry.
An Avail Rent Price Analysis report can help you complete this step since it provides comprehensive information on rental market trends, rental comps, and a rent estimate for your property.
4. Calculate Profitability
Once you’ve determined your operating expenses and rent price, you can use this information to determine your property’s overall profitability. The Avail Rental Property Calculator is a free resource you can use to get an estimated monthly income, cash-on-cash return, gross rent multiplier, and more based on the inputs you’ve provided.
The information from this calculator can also be added to your rental property business plan to keep track of how your business is doing.
Get Rental Comps For Your Rental With Avail
Getting rental comps for your rental doesn’t have to be time consuming or stressful. With the Avail Rent Analysis report, you can easily get rental comps for your rental properties and the right information to consider when determining a rent price.
Create an account or log in to purchase your first report with Avail.
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Before advertising your rental property online, you’ll need to know how much to charge for rent. Your rent price should help you generate income each month, while factoring in other rental prices in your designated area. While the process of listing your property is relatively easy, knowing how to price your rental property can be the tricky part.
In this article, we outline factors to consider when setting a rent price and provide actionable tips so you can maximize the earnings from your rental business.
How Much to Charge for Rent Explained
Setting an effective rent price is easier than you think. To help guide you through the process, we’ve shared six factors to consider when determining the rent price for your rental property.
1. Consider Seasonality
The demand for rental properties varies throughout the year, which influences how much you’re able to charge in rent. Tenants are more likely to look for their next apartment during the summer months because of summer break, nicer weather conditions, and a majority of leases ending anywhere between June and September.
As a result, landlords are able to charge higher rent prices without having to worry about long vacancy periods. On the other hand, tenants typically move less often during the winter months, requiring landlords to lower the price to capture tenant interest.
2. See What Other Landlords Are Charging
If you’re new to landlording, you may have come across this tip when learning how to become a landlord. Although there’s value in researching what other landlords are charging for similar properties nearby, this process can be extremely tedious and time-consuming — especially for a do-it-yourself landlord.
Instead, you can invest in rent estimate reporting to get the insights you’ll need to determine a fair rent price in minutes. The Avail Rent Analysis report includes comprehensive insights on rental market trends, as well as rent prices for 10 comparable for-rent properties for landlords to be aware of. All you have to do is create an account and set up your rental properties to purchase a report for a specific unit.
Pro tip: Utilize the Avail Referral Program to earn up to $500 in account credit that can cover the cost of an Unlimited Plus subscription, Rent Analysis reports, or tenant screening expenses.
3. Research Local Demand for Rentals
In addition to considering seasonality, you’ll also want to look at the demand for rentals in your designated area. If you’re in a neighborhood that is mostly made up of homes for sale, then this can give you more room to upcharge your rent due to limited options for tenants. However, if your property is heavily surrounded by rental properties, you’ll need to set a more competitive rent price to avoid being overlooked by good tenants.
4. Determine the Value Your Amenities Add
Amenities are a great addition to any rental property, especially in a location that consists primarily of rentals. If you’ve invested money into a property to offer an in-unit washer and dryer, new kitchen appliances, and new kitchen countertops, then this is something worth considering in your rent price.
The more value your property offers tenants, the higher you can charge in rent. But it’s important to avoid overcharging, which is why you need to set a rent price in relation to properties with similar amenities to yours.
5. Be Aware of Current Events
The rental industry is continuously experiencing changes — from tenants not being able to afford rent due to the pandemic to individual states imposing rent control laws. While it may be easy to determine a rent price based on competition alone, successful landlords also consider what’s happening across the nation that indirectly impacts the rental industry.
To stay informed, refer to your local landlord-tenant laws for updates on legal changes regarding rent price, or explore the Avail News library for up-to-date information every landlord should be aware of.
6. Connect With Local Landlords for Additional Tips
If you’re still on the fence about setting a rent price for your rental property, you can always ask local landlords for their guidance through the Avail Community Forum. While it may be great to manage a rental property on your own, getting input from like-minded professionals in the rental community can make it easier to determine a rent price for your new property or navigate through long vacancy periods.
Price Your Rental Property Hassle-Free
The key to knowing how much to charge for rent is considering the right factors that influence rent, investing in comprehensive rent estimate reporting, and connecting with local landlords. Create an Avail account today to purchase a Rent Analysis report, make managing your rental property easier, and grow your rental business.
Want to learn more about landlording? Explore our growing educational content page on online rent collection, rental assistance programs, and more.
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An Avail Rent Analysis report allows landlords to determine a fair and competitive rent price without having to spend hours researching similar properties for a rent estimate. This six-page report provides valuable information on rental market trends and rent comps to help you craft a rent price that makes sense for your local market and can generate income.
To help you get the most out of this report, we’ve explained what each section includes and provided suggestions on how to utilize these insights for your rental property.
How to Read an Avail Rent Analysis Report
The first page of the Rent Price Analysis report provides a rent estimate, a confidence score, and graphs with insights based on local trends for similar properties. Here’s a breakdown on how to digest these sections:
- Rent Estimate: The Rent Estimate is an estimated rent price for the property, assuming it’s in a condition comparable to nearby properties with similar features.
- Confidence Score: The confidence score is a predictor of how accurate the provided Rent Estimate is, based on the location of the property, its physical characteristics, market conditions, and insights from comparable properties nearby.
- Estimated Property Vacancy: The report provides a vacancy percentage that’s fueled by a proprietary aggregated analysis of geographic and property-specific trends in the area the property is located in.
Although the report provides an estimated rent price you can use for your property, it’s advised to read through the entire report to ensure your final rent price takes into consideration the time of the year and rent price ranges.
Rental Benchmarks
The Rental Benchmark chart provides eight average rent prices to show a full picture on how much previous landlords have charged for properties with similar characteristics. If you’ve recently renovated parts of your property in hopes to increase its overall value, you can reference the Radius High and Zip High to better understand the maximum amount you can charge in your area.
On the other hand, if you’re looking to rent to low-income tenants, the report shares an average rent price for Section 8 properties near you. When deciding which rent price to lean closer towards, it’s important to consider the different amenities you offer, the location, and overall value of the home to avoid going too high or low on the monthly rent.
Days on Market vs. Vacancy in County
The demand for rental properties changes throughout the year, with summer being the busiest time of the year for moving. The Days on Market vs. Vacancy in County bar graph can help you better understand demand for properties similar to yours, since this will play a role in just how much you can up-charge in rent.
Landlords typically charge more in rent during the summer months, since that’s when most tenants begin their apartment search and move to a new unit. The winter is when you may want to consider lowering your rent price to avoid long vacancy periods, since most tenants refrain from moving during the colder months.
Rental Saturation Benchmarks
The Rental Saturation Benchmarks graph can be beneficial when understanding how many rental properties account for a certain county based on tracked rental properties and insights from the U.S. Census.
If you find that where you’re located has a small percentage of rental properties, then this can be a great chance to advertise your rental property to tenants looking to rent in the designated area since you have less rental competition.
Comparable For-Rent Properties
The Comparable For-Rent Properties chart outlines 10 nearby properties with information on their square footage, number of beds and baths, distance from your property, property type, and current rent. Instead of having to manually find this information yourself, you can find this information on an Avail Rent Analysis report to easily store on any device.
You’ll also be provided a Google Map view of the properties listed to help you gauge how close each property is to popular destinations or landmarks.
The more value the location of your property offers tenants, the more room you have to charge more in rent than other properties.
County Rent Trends by Bedroom and Type
Rental properties typically increase in rent price year-over-year, but in order to get location-specific insights, you can reference the County Rent Trends by Bedroom and Type graphs. Whether you own a one-bedroom property or four-bedroom condo, you can see how rent trends have changed over the years for certain property types to better estimate future changes in rent price.
Area Gross Yield and Rental Trends
As a landlord, the most important thing on your mind is protecting your investment and generating passive income through your rental properties. In order to do that successfully, it’s advised to gain insights on how much a certain rent price can generate in gross yield.
With an Avail Rent Analysis report, you see what other landlords in your area are listing as their rent, along with how much the median rent price for certain zip codes helped other landlords not only maintain their investment but generate a profit, as well. You’ll also be able to find a summary of rental trends to better understand if rent in your area has been decreasing month-over-month or recently increased due to a change in demand.
Purchase an Avail Rent Analysis Report
Determining a rent price is now easier than ever with the help of an Avail Rent Analysis report. You can purchase one for only $19.99 or use the account credit you’ve earned from the Avail Referral Program to cover the cost.
If you’re still unsure of how to properly read sections of a Rent Analysis report, you can always reference the Data Dictionary section at the bottom of the report to better understand the provided insights. Set your rent price with confidence today by creating an account to purchase a Rent Analysis report.
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Knowing how to determine rent price is an essential step in the rental listing process, but the key to becoming a successful DIY landlord requires deep knowledge of what attracts good tenants, as well as what’s considered a fair market rent in your designated area.
To help you feel confident when determining a rent estimate, we’ve outlined the best tips and tricks to setting a competitive rent price and more.
How to Easily Determine Rent Price
A smooth rental process starts with knowing how to set a rent price and which factors to consider, especially for first-time landlords.
You may have been advised to charge rent that is anywhere from 0.8% to 1.1% of your property’s value, but this number does not consider what a fair rent price is for your specific location. A reasonable rent amount takes rent benchmarks for comparable units, county rent trends and localized information based on similar rental properties into consideration.
Let’s say you’re looking to set the rent at $1,395. The average rent in your area is closer to $1,095, but the amenities and design of your unit is better than similar properties nearby. Although there’s tons of value in your eyes as the landlord, all renters see is the overpriced rent that’s outside of their budget — resulting in little to no inquiries.
The more information you have on your unit’s location, the easier it will be to determine a rent estimate that’s fair and appropriate.
What Factors Influence Rent Price?
The tricky part about rental prices is you have two conflicting forces at play: having a price that is reasonable for tenants, but still high enough for you to earn a reasonable profit. You need to weigh both factors as you determine an appropriate rent price.
Considering how a tenant will react to a price is critical. They want a price that is affordable, fairly reflects the value they receive, and makes sense given the neighborhood’s market. This is why it’s important to do market research and understand the value of your property, which we’ll go into in further detail below.
On the other hand, rent is how you cover expenses, including mortgage payments, taxes, utilities, and repairs. In addition to covering these costs, you need to make a reasonable profit on your investment to compensate for your time, hard work, and financial risk. But setting a rent price that accomplishes all of these things doesn’t need to be as hard as it seems — we’ll guide you through every factor that shapes a competitive rent price.
How Do You Set a Rent Price?
All successful landlords charge rent that is profitable for the property and priced competitively to attract ideal tenants. Whether you’re new to the process or a seasoned professional, having the proper reporting in place ensures you have the correct information on hand to make informed pricing decisions.
When determining how to set a rent price, here are important factors to consider:
- Your rental unit’s value
- How you advertise your rental unit
- The current rental market in your area
- Timing and the effect of seasonality on rent price
- Sell value rather than price when advertising your property
With the Avail Rent Analysis report, you can get all this information in one place with data-driven insights, local rent trends, and more. The report shows how your rental compares to similar properties nearby, as well as rental benchmarks from the lowest to the highest rent for comparable units.
When you create an account with Avail, you can invest in a report for multiple properties and have it on hand in minutes. All you have to do is log in to your landlord account, click “Rent Analysis” and then add in your rental property to purchase a report.
Save on your Rent Analysis report by referring a friend to Avail to receive $50 in account credit once they create an account.
How to Determine Rent Price Based On Seasonality
Just like any price in our economy, rent price is subject to the laws of supply and demand. High tenant demand warrants high rent prices. But how exactly can you know if demand is high? One way to know is based on timing. The number of tenants moving increases in the summer months, and a higher number of tenants moving means there is a greater demand for rentals.
Peak rental season is May through August. During that time, rental demand is high and prices rise.
The U.S. Census published Household Economic Studies about the seasonality of moves, which confirmed that the number of moves increases in the summer months, peaking in June. The effect of seasonality depends on location: northern and midwestern states are most drastically affected by seasonal changes.
Demand is high in the summer for the following reasons:
- It’s easier to move when the weather is nice. Seasonal swings in pricing are most drastic in cold regions of the U.S. because it’s more difficult to move during winter months.
- Parents want to move during the summer months to avoid disrupting their children’s schooling.
- College students often move in the summer month before school begins in the fall.
Therefore, if you’re renting in the summer months, you can set your rent price higher. It’s also smart to aim for your rental agreement(s) to expire in the summer. If your current rental agreement expires in the winter, try negotiating a three- to six-month extension to get on a summer vacancy cycle, or try to sign a 15- or 18-month rental agreement to ensure your next vacancy falls in the high demand season.
The Importance of Determining an Appropriate Rent Price
Raising the rent price to the highest amount possible may help increase profits, but going too high or low can decrease your chances of finding the ideal tenant, or worse — not placing anyone at all. That’s why having a solid tenant screening process is so important.
How does your rent price affect your bottom line? Your rent price is your main source of income on the property. It’s basic accounting: You need your income to exceed your expenses to make a profit on your rental investment.
Should You Update Your Rent Price Frequently?
Every time your rental agreement is up, reconsider all these factors and update your price accordingly. Rental market prices fluctuate frequently. If you don’t reconsider your rent price, you might miss the opportunity to raise your rent price (if market prices are increasing).
Like any term and condition on your rental agreement, rent price needs to be thoughtfully considered each time you sign a new rental agreement. Whether you’re resigning an existing tenant or onboarding a new one, it’s best to have a rent increase notice ready for the time comes to up the price of your rental.
Set an Effective Rent Price With Confidence
By investing in data-driven insights on fair rent prices in your area, you can set an effective rent price with confidence and attract the right tenants in no time. Create a landlord account or log in to purchase a Rent Analysis report to take the guesswork out of determining a rent price for your property.
Once you’ve set a rent price, make sure it’s clearly advertised in your rental listing, along with all of your units best features, so you get the most out of your listing. Keep reading to learn how to manage tenant leads.
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As the owner of a rental property, your goal is to maximize the amount of profit that you receive from your single-family home, condo or multi-family building.
The rent that you collect from tenants pays your mortgage, taxes (ugh!), insurance, maintenance and building your reserve fund for bigger repairs. In the end, after paying all of the expenses associated with the property, you hope to have money left over to compensate you for your time and to save for that next rental unit that you want to buy – your profit.
On the flip side, tenants want to pay the lowest amount possible and have lots of options of available properties to rent.
This contrasting dynamic creates a lot of confusion and oftentimes leaving landlords wondering, “How in the world do I set the right rent price for my rental unit?”
Since co-founding Avail in 2013, I have worked with thousands of landlords from all across the United States. The question of pricing comes up all the time, and I have developed several tips for nailing the pricing equation to maximize your profit.
Timing is Critical
In real estate, it’s often said that the three most important things are location, location, location. To be an efficient and profitable landlord, I’d argue that the three most important things are time, time, time and here’s why:
Seasonality (time of year) impacts rent prices
Rent prices are largely dependent on how much demand there is for rental properties in your area.
Across the country, demand for rental properties is highest in the summer months. Demand peaks in the summer months because people dread moving in the middle of winter, especially in northern states where moving in winter entails hauling furniture through snow drifts in sub-zero temperatures. The second reason that demand is higher in the summer is that families don’t want to disrupt their children’s schooling.
Just like demand for rental properties is highest in the summer, rental prices tend to be higher in the summer months. If you are looking for tenants in the summer, you’ll probably be able to get tenants to agree to a higher rent amount than you would in the winter.
By keeping this in mind, you should try to ensure that any new leases you enter into expire in the summer months. If your property currently has a winter expiration, you may want to negotiate a three to six-month extension with the tenants to get on a summer vacancy cycle. If this doesn’t work, you may want to make your next lease 15 or 18 months long to ensure that your next vacancy falls in a high-demand season next time.
Days to Vacant
One surefire way to lose money on your rental property is to have the property sit vacant. Having a property sit vacant is so painful that you want to always know the Days to Vacant for your property. This metric is actually as simple as it sounds: a count of the number of days until the rental property is vacant.
The lower your Days to Vacant becomes, meaning the closer you are to having a vacant unit, the more desperate you’ll become and you’ll likely be willing to accept a lower rent.
To avoid a vacancy and to maintain strength in negotiating with tenants, be sure to start the lease renewal and tenant search process as early as possible.
You should always contact your existing tenants 90 days before the existing lease expires to begin the renewal conversations. If the existing tenants decide not to renew the lease, you’ll be able to start showing the unit to new prospective tenants 60 days before the existing lease expires (in most situations).
By starting the renewal and tenant search processes early, you’ll give yourself ample time to advertise your property and find great tenants. For tips on how to find stellar tenants, read this.
Starting the tenant search process early will help you avoid stress, but it also allows you to start with a high asking rent price. If you don’t receive as many leads as you need to find a qualified tenant, you can always lower the rent amount. Starting early gives you the time to gradually lower the rent, if necessary.
Maximizing Rent IS NOT the Goal
Your goal as a landlord is to maximize the profit earned from your rental. Maximizing profit, though, doesn’t always mean agreeing to the highest rent price with your tenants.
To maximize your profit, you need to find tenants who will pay rent on time and will take care of your property.
Sure, you may be able to get a signed lease with a higher rent from a bad tenant, but it’s not worth it. Sacrificing a bit on the rent amount to get good tenants will pay off in the long run. These good tenants won’t cause headaches for you and won’t cause disturbances for your neighbors.
To learn more about screening tenants and picking the right tenants to rent to, check out our 5 part guide to tenant screening.
Setting the Rent Price
Now that we know the implications of timing on the rental market and the importance of finding quality tenants, let’s talk about the specifics of setting the rent for your home.
To understand how much your rental property will fetch in monthly rent, I recommend you spend time studying comparable units that are on the market. You’ll want to be sure you’re looking at units of similar size, with similar features in your specific area.
Limiting your research to properties in your local market is important because prices can vary dramatically based on location. A single family home in Anchorage, Alaska doesn’t rent for the same amount as the same home in Austin, Texas. Even within cities, the rent prices for the same size and type of unit can vary wildly.
Even if you can’t find a long list of identical properties, studying other properties on the market is the best place to start. After developing your list of comps, or comparable units, you can make adjustments for differences between the comp and your unit. For example, perhaps your home includes a washer and dryer, but none of the comparables do. If the comparables are renting for $1,200 per month, your unit with the washer and dryer should command a higher rent.
To find comps, you can use any of the online rental sites, such as Hotpads, to find units in your area that are for rent.
Several websites, including ours, are developing algorithms to estimate the rent prices for various properties. The most established of these estimates is Zillow’s Rent Zestimate.
As I touched on earlier, the rental market is subject to the economic principles of supply and demand. As the seller of a product (housing), the more demand that you create for your property, the higher the rent you’ll be able to demand for the property.
To create demand for your property, you can certainly lower the asking rent amount, but this is opposite your goal of maximizing profit from your unit. So what else can you do? Well, you have plenty of tools for increasing demand.
For starters, be sure to advertise your rental property everywhere that interested tenants may find it. I’m biased, but I recommend our automated rental listings feature. The average landlord who uses this part of Avail receives 15-20 leads per vacant unit.
Another tip for creating demand is to create a sense of urgency amongst interested tenants. You can do this by scheduling multiple showings of the unit at the same time. When multiple tenants show up to see your unit at the same time, they’ll feel like they are competing for your unit. This increased demand will encourage interested tenants to act quickly and to pay the asking rent amount.
The Price-Value Relationship
The amount of rent that good tenants are willing to pay for your rental property is largely a result of the value that these tenants believe they’re receiving.
One way to increase the rent that you receive from tenants is by increasing the value that you deliver. Landlords are oftentimes able to increase their profit by increasing rent more than the cost of value they’re delivering. Here are three potential ways to increase profit by delivering more value:
Utilities Included!
As a landlord, you have an unfair advantage of knowing the historical utility costs for your unit. If the average cost of utilities per month has been $120, you might be able to increase the rent by $150 per month by including the utilities in the monthly rent. Your profit just increased by $30/month!
Tip: If you decide to do this, be sure to clearly outline what utilities are included in the lease agreement. You’ll also want to clearly outline any restrictions on how the utilities can be used.
New Appliances!
Tenants prefer living in nice places with new appliances. As a landlord, you may be able to increase your profit by investing in, and upgrading, your rental unit. I spoke with a landlord recently who was able to increase his monthly rent $50/month by installing a brand new stainless steel refrigerator that cost him $800 at Home Depot.
Furnished!
Depending on the type of rental property you own and the demand in your area, you may find it advantageous to rent your property fully furnished. There are companies that rent furniture, or you can invest in buying low-cost furniture from a retailer like IKEA. Because furnishing a property can be quite costly, you’ll want to carefully analyze this option.
There are many more ways to increase the profit from your property by delivering greater value. It is widely documented that consumers–all of us–oftentimes make irrational decisions about price and value.
The Importance of Emotion
It shouldn’t be a surprise to anyone that one of the biggest factors in tenants’ decisions of which property to rent is their emotions about the property. As a landlord, understanding the role of emotion on tenants’ decisions can help you increase the price and profit from your rental.
To increase rent and profit, you’ll want to ensure that you are marketing your property in the best way possible. You’ll want to ensure that you have great pictures of the property. You’ll also want to be sure you have a well-written description that attracts mobs of great tenants.
Finally, you’ll want to highlight that you’re an easy landlord to work with. Just like landlords fear renting to nightmare tenants, tenants are oftentimes worried about renting from a landlord who is tough to work with. Welcome your tenants into their new rental property with these 8 tips.
Tenants also want to do things digitally these days, including pay rent online. To save time, and to make things easy for tenants, consider using our property management software.
Diamonds are Forever, Rent Isn’t
One final thing to keep in mind regarding setting rent is that the amount isn’t set in stone, and can be adjusted over time.
To maximize the profit from your rental, you should re-evaluate your rent price at every lease expiration. While the topic warrants its own post (coming soon!), your goal should be to increase the rent as much as possible over time without creating tenant turnover (turnover costs time and money).
At Avail, we aim to help DIY landlords save time managing their rental properties. We do this by building beautifully designed software that automates the rental cycle.
In addition to building amazing landlord software, we have an outstanding customer support team that interacts with hundreds of landlords every day.
The post How to Set the Rent Price for Your Rental Property appeared first on Avail.
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