Researching Rental Property Rates
Finding out how much rent you can charge for a rental property shouldn’t be a guessing game. Though it can be difficult if you don’t know where to start. In my property management company, we use a variety of methods that seek to maximize both consumer interest and profitability. This article discusses some of those methods.
Released by the US Department of Housing and Urban Development, this annual report contains Fair Rent data that is available for City/State and property size. Methodologies and calculations are thorough, though rate is merely an average. Your rate might rise or fall based on things like the property location (both immediate andsurrounding), Amenities like common areas/pools/decks, and also any utilities included in the rent payment. Including all utilities in the rent payment is a tactic often used to entice renters as well.
Comparable Rental Properties
Similar to the way most homes are appraised, looking at comparable properties is a fantastic way to determine the rent that your home/apt/condo can produce. The most important thing to look for is properties that most closely resemble your own. Having a similar number of bedrooms, bathrooms, and amenities will ensure that you’re not comparing “apples to oranges”.
Looking online is one of the most important steps. Craigslist is a great place to find listings that closely resembling your own. Again knowing what’s included, where it’s located, and whether they allow pets is what you should be most interested in.
Also look in your own neighborhood. Location being the biggest variable, you’ll get the best idea of rental rates in your area by checking out the homes or units nearby. They’ll either list their rental price on a sign, or you’ll have to contact the property manager for additional details.
One example of an automated tool is the Rent Zestimate on the Zillow.com website. While this site used to provide only a property value estimate – they now give a Rental pricing estimate that takes into account square footage and various market data. While this info should also be used sparingly, it can also be a useful tool in confirming the pricing you’re considering.
Many managers is begin with a rental price range, starting at the top of this scale and adjusting the rate the longer the property listing remains open. An unoccupied property carries a high opportunity cost, so you may have to make a few adjustments to find that “sweet spot”. In the end, it simply comes down to finding a rate thats comfortable for both you and the tenant.