Landlording & Rental Properties

How Much to Charge for Rent in 2021: A Landlord’s Guide

Expertise: Real Estate Investing Basics
16 Articles Written
woman on couch with "how much to charge for rent" superimposed over image

So now that you have an investment property or two under your belt, you are probably considering the possibility of renting them out. However, determining the right property rent rates can be difficult at times. Not sure how much to charge for rent? You're not alone.

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After all, if you charge too much, you’ll likely have higher vacancy rates—but if you undercharge, you’ll lose out on profit.

Here’s how to check if your rental unit is priced correctly.

Related: The Right Way to Raise Your Tenants’ Rent (+ Sample Rent Increase Notice)

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First: What is market rent?

The term “market rent” refers to the current average rent price for nearby rental property. Remember, rent is determined by the real estate market value. So when determining how much to charge for rent, what other landlords are charging is valuable information.

However, keep in mind additional variables that can affect your rent, such as:

  • The number of bedrooms and bathrooms
  • Any special amenities
  • Square footage
  • Single-family homes vs. apartments or condos
  • Garage or storage space available to tenants
  • Pet policies

Prospective tenants may place more value on certain amenities, like pet-friendliness. That might mean higher rents. Just pay careful attention to your return on investment—and your boundaries.

Read More: The Ultimate Guide to Fair Market Rents

Calculating market rent prices

In addition to browsing local rental listings, we recommend signing up for a BiggerPockets Pro membership. In addition to providing access to our investment calculators and our exclusive Pro forum, you also get access to BPInsights. There, our Property Insights feature can help you determine the right price to pay for your unit by analyzing nearby listings.

This is a great place to start, so use it as a baseline. Pairing this with your own research is the best strategy. For example, go on or Zillow and find nearby properties that resemble yours. Pay attention to the year built, the number of units, amenities, convenience, interior and exterior finishes, and inclusion or exclusion of a washer and dryer. It’s unlikely that you’ll find an exact match, but this is still enough to get a good estimate on the rent.

You can also go low-tech—simply drive around your neighborhood. If you pass any properties up for rent, call their owners and ask how much they are charging. This will give you a rough indication of how much you should be charging.

These methods will help you understand the viability of different rental rates.

Know how occupancy rates affect rental price

What’s the average occupancy rate in the area? Is it 95 percent or 85 percent? How’s your property’s occupancy rate compared to the region’s? You don’t want it to be higher or lower by too much.

If your occupancy rate is much higher than the regional average, then your rent is probably not aggressive enough. If it’s a lot lower, then your rent might be too high—or you might have a much bigger issue than just pricing.

Check in with your property manager

Property managers are great resources, but don’t rely on them completely. Ask them about the current market rents and for a market report to determine how much to charge for rent.

For the report, your property management company can give you a list of comparable properties with the current rents, which you can then verify yourself—either by researching online or visiting the properties in person. They can also advise you on what amenities might increase your rent. For example, if your property lacks a dishwasher, adding one might be an easy way to raise rents by $50 per month. Of course, you should carefully calculate your potential return on investment before making any major changes.

If you don't have a property manager, real estate agents can also help you assess the local rental market.

Don’t skip the site visit

Once you’ve found a couple similar nearby properties, call or visit the property as a potential renter. Ask questions regarding the current rent, unit size, amenities, utility bill, and any special features. Preferably, you should visit the site to get a good feeling of the property overall.

Go through these steps at least once or twice a year for each of your properties. Studying the current local market increases your rental income, helps you properly manage your current properties, and ensures you make better acquisitions in the future.

Related: What Does a Property Manager Do? Here’s the Job Description

How much to charge for rent: The three golden rules

All that information is helpful, but serious investors need to dig deeper to know exactly how much to charge for rent. Follow these rules to arrive at the perfect price.

1. Minimum rent requirement

The rent has to be high enough for you to be able to afford expenses and provide cash flow.

Let’s assume your expense ratio is 50 percent, covering both the economic losses and the operating expense. Thus, in the case of a $500 rental, a 50 percent expense ratio would leave us with $250 to cover three very important things:

  1. Debt service—such as your mortgage
  2. Capital expenditure (CapEx) reserve
  3. Cash flow

You’ll likely find that $250 is simply not enough to cover all three of the above. And since debt service is mandatory, the choice we face is between our profit and CapEx reserve. What we often see is landlords pocketing the money left over after debt service, then getting excited about their great cash flow. But eventually, something will happen—maybe their house gets trashed and they need to replace the flooring, water heater, and stove.

What they suddenly experience is that tragic feeling in the pit of their stomachs which accompanies cash flow in reverse. All of the money they thought they’d made suddenly transfers from their account to their contractor‘s.

Related: How to Really Calculate Cash Flow on Your Next Rental Property

This is what happens when one has to make a choice between CapEx reserves and cash flow. That's why you need a minimum rent. There's no hard-and-fast rule, but for apartment settings, this is often around $650—and likely more like $750. For single-family rentals, this minimum rent requirement is much higher.

2. Maximum rent requirement

We are always looking to fulfill two objectives: to both protect and grow our investment. Just like there is a minimum requirement for rent, there is also a maximum. We have to be able to appeal to the widest cross-section of the potential audience. If you buy rentals that are too high within the scope of your market, this becomes difficult.

Shoot for rentals between the 55th and 70th percentile of market rents. This appeals to stable, reliable tenants but isn’t so exclusive that only a tiny sliver of the marketplace can qualify.

3. Focus on price per square foot

In order to truly compare apples to apples, you have to price your rentals on a per-square-foot basis. Let’s say you purchase an apartment building currently renting one-bedrooms for $525, and online research indicates the market could withstand a $150 rent increase.

But how big are those comps? If they’re 850 square feet, and your rentals are 600 square feet, that market research is no longer relevant—even if they’re both one-bedrooms. Can you convince people, for example, to pay even $625 if units that are 250 square feet larger are available for $700? Unlikely.

With the above information, you should now be well equipped to set an appropriate rent price for your investment properties.

Do you have any other strategies for pricing rental units to add to the above list? 

Share them below in the comment section.

Jay Chang, a civil engineering graduate from UCLA, is an active investor, developer, writer, and Founder of Hestia Capital. He moved to Phnom Penh, Cambodia in 2020 and is now investing in real estate and other business opportunities in both the U.S. and Cambodia. Before starting his own business, Jay worked at CIM Group and Pankow Builders as a construction manager. He's also part of the real estate investment group called MultifamilyMasters. Jay aspires to develop projects that bring the communities together. When he has free time, he travels, plays basketball, and snowboards.
    Matt Rachow Investor
    Replied over 1 year ago
    Good post. I agree with points 2-5, However, I've found that data driven analytics, regarding real estate valuations and rent valuations, just can't compare to first hand knowledge of a market area. There's just too many nuances that are missed from computer programs. Looking at comparables on properties, streets, or areas that you recognize is the only way to go. I know of places where just two blocks apart will make a 30% difference in valuations. It's difficult for an analytic service to make those distinctions.
    Jay Chang Developer from Los Angeles, CA
    Replied over 1 year ago
    Awesome feedback. Definitely true. Don't rely too much on data. Site visit is time consuming, but it's the best way to get to know a market and the nearby properties!
    Daniel Gengaro from Bloomsbury, NJ
    Replied over 1 year ago
    Two thumbs up!
    Lacey S. from Carrboro, North Carolina
    Replied over 1 year ago
    How do you find out what your area vacancy rate is?
    Jay Chang Developer from Los Angeles, CA
    Replied over 1 year ago
    You can find the vacancy rate in most cities simply by googling, but you should verify with a couple other sources. RentCafe and are other great sources
    Dean Valenzuela
    Replied over 1 year ago
    I agree with all the points. If your property manager is a member of the multiple listing service, they can add you to an automated property search for similar like properties and you will begin to receive real time data for active properties.
    Jay Chang Developer from Los Angeles, CA
    Replied over 1 year ago
    Great input. Thanks Dean!
    Alan DeRossett Investor from Thousand Oaks, CA
    Replied over 1 year ago
    Good post logical Data-driven method, however, our properties and all properties in California are under a 5$ plus inflation rent control Now! even as our properties could stand an increase the State-controlled Rent limits are in place. We will make other Cuts in our marginal costs to reduce our operating expenses, by adding Solar and EV charging for tenets plus upgrade buildings with new alternative crowdfunding Capital to increase rents. We will be including the First $100 of electric free with a modest $75 rent increase. Solar ROI will take only 4.6 years in this way.
    Seth C. Investor from Monterey, California
    Replied over 1 year ago
    Alan, it is only 5% plus inflation until the tenant leaves voluntarily. On turnover you can do whatever you want unless you evict. But I agree with you given the financing and tax perks of solar, it is a fundamental capex project for almost any property.
    Brad Taylor from Chicago, IL
    Replied over 1 year ago
    Please explain RUBS. Or point me to a blog here on it perhaps?
    Jay Chang Developer from Los Angeles, CA
    Replied over 1 year ago
    RUBS is simply billing the tenants for how much utility they used. You'll need to get a submeter for each utility, so you can measure how much of electricity, gas, and water each tenant is using. The cost of installing submeter depends on how your system is set up. You should talk to a submeter contractor to get a quote, but the cost is generally $200-$300/unit.
    Katie Rogers from Santa Barbara, California
    Replied over 1 year ago
    If you start billing the tenants for utilities without reducing the rent, all you have done is stealthily increased the rent. The tenants will notice whether they complain or not. If their new cost exceeds what they would be paying elsewhere, you could lose the tenant. Another problem is even incremental rent increases in the absence of wage increases may make the rent considerably more than the one-third or less of their salary that it was when they first moved in. They may stay anyway if other landlords have followed suit because current landlords do not re-qualify tenants, and they can no longer qualify for another place. If the rent becomes unmanageable, they may face an eviction proceeding and you may create a so-called professional tenant because they need to postpone the inevitable as long as possible.
    Jay Chang Developer from Los Angeles, CA
    Replied over 1 year ago
    Great point Katie, thanks for pointing this out. This is why it's very important to check if other comparable properties nearby are doing RUBS. If they are, then you are losing potential rent by not doing so. If no one else is doing this, then your property will lose tenants!
    Joe Scaparra Investor from Austin, TX
    Replied over 1 year ago
    Ok, for most of us on this board that own rentals we are small frys compared to the corporate owners. That being said, maxing out rent may not be as important as minimizing vacancy. Rents are very subjective, and not that scientific. I have seen two duplexes side by side in fairly same shape and size could vary in rent by as much as $300 per month.. A lot can vary from the quality of tenant you accept, the time of year the property was rented, the owner (age, experience, financial well being), the goal of the owner, and the needs of the renter. I have 14 rentals in the Austin, area, my rents are $75-$100 below current market but my occupancy is 98%. Yeah rents are important, especially when deciding to buy the property as an investment. If maxing out your rent is important to you then concentrate on better marketing strategies. Improve your product, improve your exposure, and improve your customer service........that my friend is the formula for maximizing your rent! Cheers!
    Bill Brittain Investor from Gilbert, Arizona
    Replied over 1 year ago
    I have tennants who love my place because there is no RUBS. I'm not very famililar, but as i understand it, those who are repsonsible users of utilities subsidize (are penalized) the wasteful ones, i.e. tragedy of the commons.
    Katie Rogers from Santa Barbara, California
    Replied over 1 year ago
    There is always the risk that responsible tenants end up subsidizing wasteful tenants.
    Rosemary Murrieta Real Estate Agent from San Clemente, California
    Replied 8 months ago
    Thank you for this article. The clear explanation about price per square foot definitely helped me. Almost all residential realtors disregard this factor.
    Wes Salous Investor from Oklahoma city
    Replied 7 months ago
    Great points Dean... Thank you
    Edwin F Zhingri
    Replied 7 months ago
    Great article thanks. I do utilities included, may look into RUBS. Cheers
    Max Power
    Replied 3 days ago
    Raise rent during pandemic where unemployment is >25% brehs.
    Dan Veld Investor from Abbotsford, British Columbia
    Replied 3 days ago
    I find changing below average rent equals longer term tenants that are happier saving money. Different ways to look at it I guess
    Alan Wendt
    Replied 3 days ago
    Yeah let's see if we can game our tenants into working three jobs instead of two.
    David Montoya
    Replied 3 days ago
    How far in advance should you notify a renter that the rent is going up?
    James Mc Ree Rental Property Investor from West Chester, PA
    Replied 3 days ago
    Two answers: the lease should specify this timeframe; if not - 30 to 60 days is good to give the tenant time to move to decline the increase. There is probably case law in each state that answers this question more exactly
    John Teachout Rental Property Investor from Concord, GA
    Replied 3 days ago
    In Georgia, if it's a month to month rental, a 60 day notice is required for rent increase (or to terminate the rental agreement). The tenant can terminate the agreement with a 30 day notice.
    Carol Kotchek Investor from Superior, CO
    Replied 2 days ago
    Another factor is whether the value of your property is going up. If you can get some cash flow from your rent plus appreciation on the property I've found that's pretty good $$$.