The first question that comes into an owner’s mind when they are considering being a landlord is, “how much is the right rental price?” The answer to this question is essential when evaluating whether or not it makes sense to rent it out.
The short answer is that the market decides. However, this knowledge is not helpful without understanding ways to figure out what the market is telling you. By the end of this post, you should have a better grasp on how to determine a rental price.
Ask around
It may sound obvious, but many people forget that one of the best ways to decide on the right rental price is to ask around. Try to find out what other places are renting for nearby. This is harder for investors as they typically are not living close to the investment. For owners considering the option of renting out their house, it is a must.
Even if you do not know someone who is renting in the area, your neighbors might. Things to consider once you get a price is comparability to your unit, when the last time the rent was adjusted and the vacancy rate. If the rent has not been changed in five years, it is safe to assume that it is worth more than the current rent.
Use an internet service
There are many websites out there that can help assist you in running an analysis on your property. Two of the popular ones are rentometer.com and rentrange.com . Most sites like these offer both a free and paid service option. Obviously, the one you pay for will be more detailed.
Essentially what these sites do is pull from a data set of similar rental properties and give you a rental amount. Typically, it will ask you for the address, amount of bedrooms, square footage, type of unit etc. to give you a more accurate number.
Find comparable properties yourself
Most remember to do this when selling a property, but you can do it to help find the right rental price as well. On websites like Zillow, you can search rentals and see if there are any similar that are currently on the market. Calculate how much they are asking per square foot and look through the photos. If you believe yours is nicer, you can probably charge more per square foot or vice-a-versa.
Sites that have listings for buying and selling will sometimes have rental estimates as well. National sites are great but so are local sites like Craigslist. Even Facebook groups can be a good resource for finding comparable properties yourself.
Consult a professional for the right rental price
Your real estate agent is usually not going to be the best source. They are often skilled at evaluating and determining the value of a house to be bought or sold, but not to rent. The truth is, the markets are totally different.
Call a property manager or a real estate professional that specializes in rental properties. If you know an investors in your area, they may have a good idea of what your property could rent for. Property mangers are typically the best source because they see rental prices every day and grow to be experts in that particular market.
Once you have decided on a rental price, observe what the market is telling you. You should have a good idea of the amount of calls and emails you are receiving. Be open to making changes to distinguish your property if you need to or lowering the asking price for rent.
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