Setting the asking price fro your investment rental is a important step to maximizing the return on your investment. The right rent attracts the right tenants and helps you to pre-screen your offering.
1. HUD Website – Fair Market Rents
The annual report released by the U.S. Department of Housing and Urban Development contains Fair Rent data that is available for City/State and property size. While the methodologies and calculations are VERY thorough, this rate is simply a good average and starting point for a property the same size as yours. Variables that will raise or lower your rental rate include the property location (both immediate and surrounding), amenities like common areas, pools, and decks, and any utilities covered in the rent payment. Including all (common) utilities in the rent payment is a tactic often used to entice renters as well. I generally find these statistics to be the floor of what you should ask.
2. Other Properties for Rent
Similar to the way most homes are appraised, looking at comparable properties is a fantastic way to determine the rent that your home/apartment/condo can produce. The most important thing to look for are 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”.
Start 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.
Looking online is also an important step. Sites like Craigslist or Rentals.com are great at filtering the listings so that you only see those most closely resembling your own. Again, knowing what’s included, where it’s located, and even whether they allow pets is what you should be most interested in.
One of our favorite automated tools is located on the Zillow.com website. Not only do they provide a property value estimate – they now give you a Rent Zestimate that takes into account square footage and available market data. While this info should also be used sparingly, it should help solidify that number that you’re now considering.
When a manager is confident about the rental range that their property can support, they often begin at the upper spectrum of this scale. If the property should stall or generate little interest, they can always adjust the rate down to “re-energize” the listing. Knowing that a vacant property carries a high opportunity cost, you may have to make a few adjustments to find that “sweet spot”. Call me at 678-0232-0927 if you need some help.