3 Ways to Determine How Much You Should Charge for Rent

I’ve been in the rental real estate industry for almost 17 years now, and during that time, I’ve added many properties to my portfolio from various states. When it comes to rental income, there’s no one magic rate that I could set across the board, so I always wondered how much I should charge for rent with each new rental I acquired.

After gaining experience, I’ve learned that each location has its own set of market qualities that determine the rate, and that there were certain things I needed to do to ensure the max rate was set for each property. With that in mind, in this article, I’m going to share a few of the most important factors you should focus on when determining what monthly rate is best.

Figuring Out How Much You Should Charge for Rent – A Quick Guide

If you’re new to the game, it may seem a bit overwhelming to figure out how much you should charge per month for your rental property, but it’s actually pretty simple. You just need some tips and guidance from those who have been around the block a few times. Let’s begin by taking a look at a few strategies I use to set the right rental rate for each of my properties.

1. Perform a Market Analysis to Set the Max Rental Rate

When I’m determining rental rates for my residential properties, I do a comprehensive analysis of the market, and this can sometimes take years, but it’s well worth it.

You’ll want to look into the job market and population growth of the area. A strong and growing job market typically signals a robust demand for housing, which enables landlords to charge higher rents. Along with this, areas experiencing population growth often see an increased and steady demand for rental properties, and this pushes rental prices upward as well.

When it comes to the job market, wages that are on an upward trend and the presence of big businesses in the vicinity of a property can significantly influence its rental value. Areas with a strong commercial presence offer better employment opportunities and convenience which makes them more desirable for potential renters. Most importantly, when you have a thriving job market and economy, where large colleges, hospitals, and Fortune 500 companies are present, you’ll also have people in the area who will need a place to come home to after work.

Areas such as these often provide a scenario where landlords have waiting lists to get into their rentals. As you can see, location really matters when setting rates, so be sure to dive into my latest post which discusses more details on this subject – Why Location Matters in Real Estate Investing.

Another critical factor in determining how much you should charge for rent is the quality of the local school district. Properties located close to good school districts can command higher rents because they’re more attractive to families with children.

Additionally, the crime rate affects how much you can charge for rent because properties in neighborhoods perceived as safer will have higher rents. Not only does a high crime area signify that the area is not safe, but it also means that a particular housing market is going downhill and will bring the property values down along with it. High-crime locations also typically have high vacancy rates. If you’re not familiar with this topic, you can read up on it by heading over to my post – Do Vacancy Rates Matter in Real Estate Investing?

2. Sought-After Property Features Allow for Premium Rents

Another factor to consider in determining the right amount to charge for rent involves the assessment of its features and market comparisons. Sought-after amenities such as granite countertops, a yard, garage, fireplace, large closet spaces, and a modern kitchen significantly impact rental pricing. These features attract potential renters looking for a premium living experience, allowing homeowners to set a higher price point compared to a no-frills rental. Also, the number of bedrooms in the property plays a big role in how much you can charge per month. More bedrooms mean accommodating more residents or providing extra space for a home office, which is highly desirable in today’s market, further justifying a higher rent.

New construction homes with new appliances also command a premium rent and this is the only type of property I buy, as well as sell. Renters are willing to pay more for a newer property, where everything from the plumbing to the HVAC system is less likely to encounter problems than in older rehabbed properties.

3. Rely on a Property Manager to Determine How Much You Can Charge Per Month for Your Rental

A property manager’s extensive experience can help set you on the right path to charging the best rental rates for residential properties. A property manager’s understanding of their local real estate market, including current demand and supply dynamics, allows them to accurately assess a property’s worth in comparison to similar properties in the area.

They also stay informed about the latest market trends and economic factors that could influence rental prices, ensuring that the rate set is competitive yet fair. This expertise enables property managers to strike the right balance between maximizing rental income for property owners and attracting as well as retaining tenants.

In addition to market knowledge, property managers bring a wealth of experience in understanding the unique features and amenities of a property that can justify higher rental rates, as I discussed earlier. They’re skilled at evaluating the intrinsic value that these characteristics can add to a property. If you’re on the fence about using a property manager to oversee your rental, you’ll want to visit this article I put together – Financial Advantages of Using a Property Management Company.

All my rentals are cared for by property managers. They not only take care of raising rental rates for me, but also keep the property in good shape and take care of the tenant’s needs as well.

Power Resources for Real Estate Investors

• The Financial Freedom Academy
• Freedom Number Cheat Sheet
• 90-Day Financial Empowerment Bootcamp
• Morris Invest & SDIRA Program Overview

Maximize Your Returns by Setting an Optimal Rental Price

As you can see, there are a wide variety of elements to factor in when considering what to charge your tenants for rent. Gaining an understanding of these critical factors can enable you to set competitive rental prices confidently, guaranteeing a well-performing investment that enhances your portfolio.

If you’re searching for a profitable rental property to invest in, one that justifies a premium rental rate, our team can help. Simply schedule a free call, and we’ll guide you towards owning a cash flowing property that will provide you with a steady stream of rental income, month after month. We’ll do the market research for you and also assign an experienced property manager who can assess your rental rates every year and raise them when justified, so you won’t have to.

Before you go, dive into the following video that includes a Q&A session with the question, “How do I know when to raise rents?”:

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