Being an independent landlord, there are some essential things you should know to be successful, and it all begins with setting a profitable rental rate. However, determining the proper rental price can be stressful, especially since the rate should be competitively priced, meaning to attract multiple tenants.
Although you may be tempted to charge for the highest rate, this could easily backfire. At the same time, setting the rental rate too low will leave you with no profits. Finding a balance is key to success, but you must know some tips before setting the final rental rate.
Before you start thinking about setting the appropriate rent, let's talk about the importance of charging the right price, especially if you're an independent landlord.
The main challenge that many landlords are faced with is payment problems. Statistics show that 84 percent of landlords are faced with rent payment issues. On top of that, the cost of evictions ranges around $3,966, including the time it takes to file an unexpected eviction.
That said, you should remember that if your rental rates are too low for your property or area, you might not find a proper tenant. Similarly, if the rates are too high, you risk losing a monthly income. The best thing to do is to search for a fair market rent ideal spot.
Additionally, your job as a landlord is to also consider the average income of people who live in the area of your property, so the rate targets ideal tenants. As a result, you'll more likely get paid on time, and you can fill your space quickly. To help with that, Rentberry is an ideal online software that you can use to connect with your tenants and ensure they pay their payments online on time.
No landlord wants to rent their property and has no profits at the end of the month. That means, your property is an investment and you should treat it as one. So if you can't cover all the costs for your rental property from the rental income, then you should opt for an appropriate and profitable rent price.
As mentioned, the proper rental price could increase your monthly profits. The Balance's statistics show that landlords can put up to six percent of the rent into their monthly rental income, and that's sufficient enough.
Now that you have a clear idea of the importance of the proper rental rate, now it's time to learn some tips before deciding on a final price for your property.
It's no surprise that inflation has affected the rental market as well. According to Apartment Lists's rent index, rental expenses are continuously increasing yearly in all national markets around the U.S. However, it's also essential to know your competition and see what other landlords are charging in your area.
The average price can vary depending on the state or city; that's why you should look out for market comps in your area, and then adjust the price based on your preferences.
When viewing your competition, ensure to see if other rental units have similar features to your property, such as location, neighborhood, size, or property condition. If necessary, you may have to shift prices to remain relevant in the market.
If you've been in the rental market for too long, you've probably heard about the 2 percent rule, meaning the monthly cost of the rent should be around 1-2% of your property's value. However, you shouldn't necessarily use this rule as this is a quick way of coming up with a potential price point.
Considering how property prices are constantly changing and increasing, this type of calculation may not be accurate.
If you want to get a clearer idea of other rental properties in your area, you should go through sites like BostonApartments.com, Trulia or Craigslist. Additionally, you can search for effective ad ideas to grab the attention of potential tenant applicants.
Unfortunately, some landlords tend to forget to consider other crucial rent factors before placing a rent price. So, if people are dismissing your rental, you should take this as a sign that your rent is either too high or too low. At the same time, it's also advisable to consider property location, amenities, parking options, etc.
One of the most underlooked factors of rental prices is seasonality. You'd be surprised at how rental property shifts during the spring or summer versus winter. Usually, the main reason for this is the inconvenience that renters have to go through during the colder months.
That said, the Apartment List shows that 25 percent of people who want to move in the summer do so within a month, whereas 22 percent of renters who want to move in January take up to three months. However, remember that during the winter season, you may need to set a lower rent price to avoid facing vacant rental property.
While comparing your property to other competition, it's essential to look at its features. For example, if you find a property similar to yours but it doesn't have a feature like a dryer or washing machine, then you can justify your higher price.
Additionally, tenants tend to look for certain amenities like: