How are your rental rates compared to neighboring properties?
Everyone wants to increase profits as much as possible, but charge too much, and tenant go elsewhere. Sometimes this becomes apparent in the days after placing an ad when you get no calls. On the other hand, too many calls could be a sign that your rate is too competitive — and no one can say no to such low rent.
Here are a couple of tips for calculating the ideal rent rate:
First, find your bottom line. After looking at all your fixed expenses — mortgage, insurance, taxes, add in a fair estimate of maintenance costs. Go over those figures with a financial advisor to determine the minimum you must charge to meet your profit goal.
Then, find the high end. Just how much is your rental worth to available tenants? How much desire is there for the property and the area?
Compare that to the competition. Take a look around the neighborhood and do some research online. Rentometer.com is a site that offers a quick, simple way to compare rents. Websites like rentrange.com or rentbits.com each provide a report detailing the rent prices in the neighborhood. Craigslist recently added a “map view” function to the housing search which may be very helpful in comparing your rental properties to others.
Be sure to consider what the surrounding properties offer for the price. Do they have a really nice on-site gym and pool? Are there washer/dryers in the unit(s)? How much more do they charge for an upstairs versus a downstairs unit?
Keep in mind that prospective tenants are doing this same research. With online ad sites having the capability to showcase photos, floorplans and videos, renters can “tour” several other properties in the neighborhood in a matter of minutes. If the difference in rent is too great, it can make your unit less appealing by comparison.
Some landlords choose turnkey software solutions to help gauge the rent figure. Quicken-style computer programs can automate not only the rent rate decision, but can serve other administrative tasks as well.
Be careful not to try to adjust your rate up after speaking to a prospective tenant — you may legally be held to your original quote.
Remember the right rent may attract the right tenant — but more so, the right rent represents the maximum profit.
With AAOA, landlords have resources at their fingertips. Check out our Landlord Forms page.
American Apartment Owners Association offers discounts on products and services for landlords related to your rental housing investment, including rental forms, tenant debt collection, tenant background checks, insurance and financing. Find out more at www.joinaaoa.org.