Landlording & Rental Properties

8 Things to Consider When Setting Monthly Rent for Your Investment Property

Expertise: Landlording & Rental Properties
17 Articles Written
House with "For Rent" sign in front

A successful investment property depends on a range of factors, but determining rental rates is one of the most important considerations you’ll face when it comes to profitability.

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Setting a rental rate is a careful balance between generating a profitable income, maintaining a competitive price point, and attracting desirable tenants. In most rental markets, tenants have the opportunity to choose between several available properties, so setting an appropriate rental rate will have a direct impact on your ability to reduce vacancy rates and costs.

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The most basic rule to follow is to choose a rental rate that is in line with comparable rental properties in your location. However, it is important to remember that not all properties are created equal. If your two-bedroom apartment is listed at a much higher monthly rent than the two-bedroom apartment across the hall, there needs to be a reason to persuade tenants that your unit is worth the higher cost. Does your unit have beautiful views? An included washer and dryer? Extra storage?

Related: The Top 7 Rental Amenities Quality Tenants Want

Here are several things to take into consideration that will affect your rental value and desirability. 

8 Considerations When Determining Rental Rates

  1. Where is it? Consider the walkability score of your rental property and the value it could provide to your tenants. Are you close to schools, shopping, restaurants, or public transportation? If so, you may have an opportunity to ask for a higher rent amount. You’ll also need to keep in mind the location, quality, and safety of the neighborhood or area in which your property is located. You could own a brand new, renovated rental property, but if it’s located in an undesirable neighborhood, it’s unlikely you will succeed with a higher than average rental rate. 
  2. How big is it? The square footage of your property will be one of the top factors influencing your rental rate, similar to listing a home for sale. Tenants are going to consider the price per square foot to ensure the best bang for their buck. A property with a higher square footage is likely to be more desirable than a property with limited living space, even if both have the same number of bedrooms and bathrooms.
  3. What can you see? Take in the view from your rental property, and consider if tenants would find it desirable or not—especially if you are pricing units in a multi-unit property. Garden, city, or water views easily justify an increased rental rate. If your property has an alley view, looks directly into a neighbor’s property, or simply has no view at all, you might consider adjusting the rent appropriately.
  4. How much can you store? Amenities like extra closets, kitchen cabinets, garages, or sheds all raise the appeal and value of a rental property. If you have the option, consider offering some sort of storage opportunity to your tenants for an extra monthly fee.
    woman using internet website for rental apartments, houses
  5. What’s included when it comes to appliances? Almost across the board, properties that include an in-unit washer and dryer will have a higher monthly rent. Other desirable appliances include a dishwasher, garbage disposal, microwave, and central air. If your property requires tenants to secure their own refrigerator, stove, or other appliance, consider setting rent at a lower rate. 
  6. Is it up-to-date? Updated touches are the main factor that will set your rental property apart from comparable properties in the area. Fresh paint (interior and exterior), new flooring, modern appliances, and updated light fixtures will all make your property stand out from the competition and support a higher rental rate. 
  7. What’s included when it comes to utilities? You do need to keep affiliated utilities in mind when setting your rental rates. If tenants will be on their own for all of their monthly bills, reflect this in your rent price. If you’ll pick up a few or all of the utilities every month, this should also be reflected in your monthly rate. Some tenants will prefer the ease of paying one bill every month with utilities included, even if it means paying more.
  8. How many “extras” do you offer? Amenities are truly what sets your property apart from others on the market. Offering things like internet or cable included in rent is a great way to attract tenants and potentially raise your rental rate. Other amenities tenants are willing to pay more for include fitness centers, pools, shared common areas, and outdoor features like barbecue areas or rooftop decks. 

Related: 6 Insider Tips to Fill Rental Vacancies

There are many factors that will play a role in determining a fair rent price for your rental properties, and you’ll have to spend time doing some research and evaluation. At the end of the day, features that make your property more desirable than the competition justify your ability to ask for a higher monthly rent.

Beyond your profitability and income, understanding fair market rent for your location will give you reasonable expectations and help you reduce rental vacancies. 

Are there any other factors not included above that you consider or have been advised to consider when setting rental rates?

Add them in the comment section below!

Aside from being a landlord and real estate investor himself, Nathan founded Rentec Direct, a software company that serves the rental industry. Today he works with over 13,000 landlords and property managers by providing them automation software and education to effectively manage their rentals.

    David Krulac from Mechanicsburg, Pennsylvania
    Replied 22 days ago
    Nathan, Good points in your blog. I've been renting properties for decades, some of my observations are: 1. Appliance packages; In luxury condos we provide the full package include full size washer and dryers. In detached house we provide a a small package as many house renters come with their own appliance packages, so we usually don't provide washers, dryers, refrigerators or microwaves. In basic apartments/houses we always provide frig and range. In houses on septic systems we ALWAYS remove the garbage disposals. 2. Outside maintenance; on apartments and condos we include lawn mowing and snow removal on all rentals. But on all houses it is the tenant's responsibility. 3. Amenities: We have some condo units with pool, tennis courts, and clubhouse, but most tenants are neutral to those amenities. All the units there are 1 or 2 bedrooms, mostly singles or couples, mostly of working age, very few kids and very few families. We have units in the same complex with some units that have free heat and hot water, and others that the tenants must pay for heat and hot water. The condo association prices those utilities at $50 more month. However, the tenants NEVER pay $50 more for the same unit with free heat and hot water. They look at the rent amount and ignore what the utility costs are, go figure. Have seen the same thing with detached garages. The tenants are neutral on having a garage for the most part unless they have an expensive car, and even then. Even when we did not charge extra for the garage, tenants didn't want them and we ended up renting them to separate tenants from the house. 4. Walkability; Personally I like the idea of being able to walk to places, but most of our tenants are in the burbs and rural areas. Everybody has a cars, often times multiple cars and walking is not an issue. Thanks for posting your article
    Katie Rogers from Santa Barbara, California
    Replied 21 days ago
    When I was a tenant, one thing I did not like was a certain apartment complex advertising their swimming pool as an amenity, but after I signed the lease, I find out they will never turn on the heater at the pool unless the landlord was hosting a pool party. Tenants could enjoy the pool for a couple days after the party until the pool cooled again.
    Domenick T. investor from Springfield , New Jersey
    Replied 20 days ago
    Many of these extra items will help a renter decide between two comparable units. However, I think the major drivers of their decision still focus on the Big 3: (1) Where is it?, (2) How much is it?, and (3) How big is it. Anything not related to these big three factors will just help to nudge a potential tenant one way or the other. They won't make a major difference in what you can charge for a rental. That's my experience at least.