Our ongoing series of rental investment continues with Setting Rent.
When choosing the rent amount, the basic laws of supply and demand applies. The best rate will maximize profit and minimize vacancy time. The first thing to do, is to evaluate your property. For example, what you can charge will depend on if you have a home, a duplex, a quadplex, or an apartment complex. A home is generally the most expensive of those options, followed by duplexes, followed again by apartments and quadplexes. There are other options that you should also consider. This includes evaluating:
Next, you will want to analyze similar properties. If you have a 2 bedroom/1 bathroom that is downtown, with no washer or dryers, no yard, and full kitchen appliances, the best thing you can do is to check MLS or local listing sites and find what similar properties are going for. The other option is to check to see how long they sat on the market. The best rate is not the highest rate, but the one that lets you get the unit rented with minimal vacancy but still at a reasonable price for both parties. However, you can’t always find an exact match for your property. So it is best to see how much more units with yards go for compared to ones without, and assess the situation as best you can to price it.
The time of year will factor in more so if you live in a college town. Closer to summer and August will increase the price too, in those towns especially. Times of the year when less people move to town you may need to decrease the price. Furnished options don’t have to come from you, and if you don’t have a washer/dryer, you may not need to buy one. It can help just as much if you have options to give them to rent out their own washer/dryer, just adjust the price $30-$50 accordingly, same with furniture rental companies. But any upgrades you do make can be advertised which can be very helpful. Pets being allowed doesn’t have to increase rent, because not everyone has pets. What you can do instead is charge X amount of money for a pet deposit, or X amount in pet rent for larger animals. This caters to both pet owners and non-pet owners alike.
Whatever price you choose, vacancy can be minimized by pre-leasing and proper advertising. It is advised also that you offer a commission to any realtors with tenants they want to refer to you. But knowing how you or the realtors you work with will advertise can help a lot, which we go over in Part 4.
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