How to Set Monthly Rent

Question

We have 15 doors, some SFH, some duplex/triplex's in St Petersburg FL.   We've been setting rental rates based on Zillow, Rentometer and a review/competitive comparison to what's currently listed.   However, we are consistently able to find a tenant in 48-72 hours from the Postlets/Zillow Rental Manager posting alone.   We gave up on Craig's list here due to quality of tenants.   Generally B class properties.

Should we ask more?

I think we could raise the asking price higher, and if not rented in 7-14 days, lower the price and end up where we are.   Don't think it's the same as a listing to sell price where being high originally can hurt you.   The rental prospects turn much more rapidly.

How do you set your rental rates?

JD Martin · Answer

I prefer to have a somewhat better place at a slightly below market rate, because I like having the same "problem" you are having. You can probably get more money, but those last few dollars are always incrementally the hardest to work for. I like easy work, so I like being a little less than others. There is another advantage to this approach: tenants know they have a good deal and are less likely to move or screw up. a good thing.

John Suralik · Answer

@Bob Ebaugh I like the idea of shooting high and seeing what price point meets resistance and posting on Zillow/ Trulia over Craigslist. I think I've been leaving money on table too, because I've been signing leases in a few days for years. Up to this point, I've been valuing finding a quick, dependable tenant over getting the best return, but I think I'm hurting myself. I can afford to have a month of vacancy to test my hypothesis at this point.

Jonathan Makovsky · Answer

@Bob Ebaugh I agree and think you answered your own question, go higher and see how much demand you're getting.

Did you go on Craigslist and other rental websites to see how much other landlords are getting? Can you call other landlords or brokers in your area to get other opinions?

Good luck and please keep us posted.

Stephanie Hardy · Answer

One thing to think about, too, is if you price higher, you would be potentially lowering the number of applicants and maybe the quality of applicants to choose from may decrease, as well. Just because they make more money doesn't mean they will be better tenants. They could have more liabilities because of that increased income. Also, like @Marcia Maynardsaid, they may look for a lesser rental place when the lease is up.

Alex Malone · Answer

I'd definitely bump it up, and then step down if you're not getting enough interest. The tenant who can afford to pay $1250 is usually a better quality than the one that can afford $800. If you rent within 72hrs you're pricing under market

Marcia Maynard · Answer

I agree with @Jd Martin. You want to find a good tenant that has incentive to stay long term. If you price it higher you may still find a tenant, and perhaps for a little more work, but they may be less likely to stay if they find a better value elsewhere. Turnovers can cost a lot of money.

Jeff Gates · Answer

I would try 4% more

Bob Ebaugh · Answer

@Jacob Sampson, You are right...the market sets price.

Been thinking about this for a long time, but what prompted the post is a turnover last week.   A couple with 800+ credit ratings rented a 950 sqft 3/1 we own for $1100.   The previous tenant paid $1000.   That couple told us they had been looking for a couple months and our rental was cleaner than anything in that price category, which was what they looked at.

We did spend an extra $500-600 over the minimum needed to turn this one.   It was clean.   Including some cost to repair landscaping destroyed by the previous tenant.   But could have spent more....

But should we have tried for $1250?    I just don't know.   That's at least $150 over similarly located and sized properties.

Bob Ebaugh · Answer

@John Suralik, No doubt turnover is expensive.   That said,  back when I was a renter (circa 1985) we hated to plan our life around an annual renewal.   So we don't do that to our tenant pool.   Besides, philosophically, I don't want a tenant that's unhappy.

But your perception is exactly right...still don't want to leave money on the table.   But if we get more aggressive, are there negative ramifications to that?

Jacob Sampson · Answer

We don't get to set rents, it is our job to find out what they are.  You have the right idea.  The nice thing is you have more than one so even if one sits vacant for a couple more weeks than normal, you have other rentals to carry you.  Its a small price for the education.

How to Set Monthly Rent

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