How to Determine Rent: 8 Tips for Making Sure You Are Charging the Correct Amount
Rent is simply a price. The price someone is willing to pay to use your property for a set period of time. This price is determined by hundreds (if not thousands) of individuals – landlords and tenants – voluntarily coming together and agreeing on a rental amount. As landlords, we want our rents to be as high as possible, while our tenants want exactly the opposite. Somewhere in the middle is where the price is set.
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Rents will be determined by a number of factors. These factors include:
- Amenities such as central heat and air, appliances, covered parking, etc.
- Size of the property, 1 bedroom versus 2 bedrooms, etc.
- Type of property. A 2 bedroom single family home might rent for more than a 2 bedroom apartment in the same market.
Every landlord should on a fairly regular basis evaluate their rents. Are you getting all the market will bear? If not, it might be time to raise rents. So how can you determine what the market rate rents are? Here are 8 tips.
- Constantly scan your local papers. I say papers because many markets are served by more than one. For example in my market the daily paper does not really serve me well but the weekly paper does. It may seem old school, but a lot of landlords and tenants are old school.
- Check out Craig’s List every so often. Many big and small landlords advertise their properties here and you can get a lot more information than from the newspapers. This is a great resource for almost every part of the county. Plus you can do keyword searches for your specific market and type of property.
- Check out your competitors’ and local property management companies’ websites. They will often have several listings near you and will show all of the amenities.
- For rent signs. I hardly ever use signs anymore but in some markets you have to. If you are in one of those markets call the number on the signs and act like a potential tenant. This is a great way to find out what properties in your area are going for.
- Talk with other landlords. You can find them at your local REIA meetings. Rents are not a big secret and if a landlord has been able to raise their rents they are often almost boastful about it.
- When your unit goes vacant, try and bump up the rent. See if the market will bear the increased price. If you do not get any takers in a week or so, start easing down on the price until the unit rents. You will eventually find the market rate.
- Too many applicants? Conversely, if you have multiple applicants on the first day of availability, your rent is likely too low. Renters are flocking to a deal. Backup, do a little research and set the price higher.
- Check the MLS. Many landlords and realtors now also list their available rental on the local Multiple Listing System (MLS). If you are also a realtor, you should check out this searchable database. If not, you may want to find one to help you.
Finally remember that rents do not always go up (just look at Detroit.) You may need to lower your rents depending on your market conditions. Either way, hopefully these tips will help you keep your rents at market level.
Surly there are other techniques unique to the various markets around the country. If you know of a technique that works well where you are, share it in the comments below.
Photo: Abbey Hendrickson