Trying to make a profit on your investment property is one thing; setting the price for it is another. With the competition as strong as it is, you need to make yours stand out and make it a desirable option for the tenants. It means pairing a high-quality offer with the right rental price. With a little market know-how, research and math, you can determine the suitable rental amount for your investment property.
Take these four tips into consideration when determining the rental fee of your property:
Consider the Market
Depending on the market where your property is located, the formula to figuring out a proper rental price is pretty simple: the higher the competition, the lower is the price. However, if you want to have the advantage compared to other properties, survey the market, see what the general prices of those properties are, then find the middle ground that appears ideal for your property.
Research Rental Prices for Units Similar to Yours
It may be a little hard to find this out yourself, as all information of this type usually is confidential (unless you are a buyer.) You can always try to find out how much rent others are charging for their units to determine the starting point of yours. You can also consult sites like Zillow, Craigslist and Trulia.
Start with practical things a rental unit should have: those that resemble yours by age, square footage, amenities, number of bedrooms and bathrooms, location, etc. Make a list of properties that you find which match yours or are similar and their occupancy rate. See if you can ask a similar rental price. If you want to be sure, talk to a property manager about the exact estimate.
Consider the Location
Location is almost always the number one factor to consider when setting the price of your rental property. People are generally willing to oversee some “negatives” of a property (i.e., lacking amenities) if the location is in a convenient and accessible neighborhood. Depending on your target rental group, your property could be all they are looking for. Are you renting to families? Being close to kindergartens and schools could be great for them! Are you targeting business people? The proximity to modern office structures, firms, and the city are essential. Want to rent to students? They’ll probably be willing to pay more for flats close to local colleges. Also, renters usually want to spend more for apartments close to public transportation.
Know Your End-Goal
When you are renting a property, you want to know not only who your primary market is but how do you want to go about it. Is your end-goal to rent your property long-term and to find tenants that’ll stay for an extended period. If they will keep your unit in good shape, and treat it as their own (as opposed to problem tenants that will give you headaches), you can consider lowering the initial price. If you don’t care if the tenants are staying short or long term, keep the price as suggested by your property manager or your best guess. However, do keep in mind that changing tenants often means investing money repeatedly into renovations (painting, furniture updates, cleaning services, etc.).
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