How Do I Determine What to Charge for Rent on My Property?
The answer to the question, “How can I know what to charge for rent on my property?” isn’t straightforward. There are many variables to consider. It’s unlikely you’ll charge the same amount from one property to the next. Similarly, you’ll probably charge differing amounts of rent from one apartment to the next—even if they are in the same building. It all depends on what the property offers the tenant and what nearby properties are charging. For a definitive answer to the question, “How do I determine what to charge for rent on my property?” it’s best to consult a licensed property manager.
An Overview of What to Charge for Rent on My Property
In determining the matter of what to charge for rent, it’s important to look at the issue from the perspectives of both the landlord and the tenant. If you charge too much, tenants won’t want to rent your property. Your property will sit vacant for long periods of time, during which it won’t produce any income for you. On the other hand, if you charge too little, your rental business won’t earn enough of a profit. You also run the risk of attracting low-quality tenants. You’ll need to strike the right balance.
First, take a look at the overall value of the property. As a general rule of thumb, landlords often charge between 0.8% and 1.1% of the property’s value. For example, let’s say your rental is a single-family home worth $250,000. You would charge between $2,000 and $2,750 for a month’s rent. Of course, the actual amount you’ll charge is also dependent on the factors explained below.
A Comparative Market Analysis
You might decide to hire a professional property manager to conduct a rental analysis for you. One of the first steps the manager will take is to conduct a comparative market analysis. This type of analysis evaluates the properties within a certain radius (usually one mile) of the rental property. The manager will consider the quality of those properties, as well as their rental ranges. A comparative rental analysis might also consider the average income ranges of the individuals who live in that general area. If the analysis results in a rental range that seems a bit too low, the property manager may then go out to the property to view it in person.
The Type and Condition of the Property
By viewing a property in person, a manager can get a better sense of its true value. The rental value of a property involves much more than just its square footage and the number of bedrooms it offers—though it is worth noting that each extra bedroom could raise the rent by $200 per month, which is why your property manager might recommend converting a den into an extra bedroom. Determining the rental value also involves taking a look at the condition of the property.
For example, has the property been recently painted? Is the carpeting new? Does it have gorgeous hardwood floors? Perhaps you’ve recently renovated it to upgrade the insulation for better energy efficiency. These are all factors that can contribute to a higher rental amount.
The Available Amenities at the Property
In addition to the overall condition of the property, its amenities can play a major role in determining the rent. In Arizona in particular, pools are a major draw for tenants. If you’re renting out a house with its own private pool, you can usually raise the rent by at least $200 per month. If you have an apartment complex with shared pool facilities, you can also increase the rent. Other amenities that can raise the rent include the following:
- Included trash removal
- Onsite laundry facilities
- Extra, secured storage areas
- Complimentary security system
- Community barbecue area
Features such as these can attract high-quality tenants who are willing to pay a higher price.
The Amenities Close to the Property
It’s usually a good investment to offer more amenities to your tenants. However, you can also take advantage of nearby amenities in the community. If your property is ideally located, you can typically charge more for rent. For example, consider whether your property is close to the following:
- A supermarket
- A fitness center
- Entertainment venues
- An excellent school district
- A transportation hub (i.e. close to a train station or highway)
As you can see, many local amenities can help drive up the price of your monthly rent.
It can be difficult for landlords to answer the question, “What to charge for rent on my property?” It’s often helpful to have a neutral third party take a look at the property. At New Concept Property Management, our licensed manager conducts comprehensive market analyses and property evaluations to determine a fair rent that is also profitable for the landlord. To request your free rental analysis, you can call our office in Tucson at (520) 305-3950.