How Much to Charge for Rent and Guide to Leasing Your Rental Property

How Much to Charge for Rent, and
A Guide to Leasing Your Rental Property

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Two of the most important aspects of owning a rental property are minimizing vacancy loss and getting the best return on investment.

To do this, you will need to know how to determine the best rental price for your rental property and then how to develop a sound marketing plan in order to lease the property quickly and get it front of as many potential, qualified tenants as possible.

In this blog, we will outline how you can go about setting the most competitive price that gets you the best ROI, as well as key marketing strategies and tactics to implement in order to get your rental property to lease fast and minimize that vacancy time.

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How Much to Charge For Rent

Setting the right rental home price is extremely important to renting your property. You want the price to be high enough to give you a solid return and cover your expenses, but not so high that you do not get any activity on it or tenants interested in leasing the home.

A good property management company or REALTOR ® can offer the following services, or you can choose to do it yourself if you feel up to it and confident about performing the following research and gathering methods in order to determine the best rental price for your single-family investment property.

Setting the Best Rental Price on a Lease Home
  1. First, research and find comparable properties to see what they are leasing for in the current market. You should gather data from multiple sources, including Zillow, MLS, Apartments.com, Realtor.com and others. You can also view sites such as com or Zilpy.com that can provide a good starting point for you. Look for a minimum of five similar properties to best gather information on the competition and gauge the current average prices.
  2. Look at properties first in a similar neighborhood and location. Is it an in-demand neighborhood? You will want to potentially add +10% to the rent price due to the desirability of the neighborhood.
  3. Next, look at properties that are a similar size (square footage) with similar number of beds and baths.
  4. Then, look for properties that have similar updates and features. Adjust your price to -20% to +20% depending on what you find. For instance, some tenants may be willing to pay a higher price for a home with appliances included, since it costs thousands of dollars typically to buy those appliances themselves.
  5. You can also estimate your total expenses and add 30 to 40% to come up with a good rental price starting point. So, if your expenses include a mortgage payment of $1,200 per month plus maintenance costs, then you could possibly charge $1,900 per month to ensure a good return. When accounting for your expenses, be sure to consider recurring maintenance costs, among others, in addition to just mortgage payment, such as maintenance and repairs, property taxes, property insurance and even property management services.
  6. Consider the season. In 2021, rent growth estimates were around 2% for the summer season going into the fall, according to Zumper. 

This could be contrasted with leasing the home in the winter season, which is typically a much more “dead season” when rents may need to be adjusted downward by 2%.

Other ways to determine rent price could include this formula:  Multiply your home value x .1% or .05% to arrive at a price so you can pay off your mortgage in 10 years to 20 years.

But again, be sure you are falling in line with current rent prices in the market.

The most important thing is that you are covering all of your expenses and generating a profit. Without having a good grasp of your expenses, it will be hard to set a good price. Also, you want to attract good, quality tenants. So set your price at market value to ensure your attracting the best tenants who will take care of the property well.

Property Management Companies are experts when it comes to price setting and screening tenants. They have vast experience based on all the rental properties they manage and access to paid resources that include better rental analysis and comps for similar properties. 

Consider hiring a property management company if you do not feel confident with coming up with a price plan yourself or managing all the legalities and tenant/maintenance issues that come with owning a rental property and being a landlord.

 

A Guide to Leasing Your Rental Property Fast to Avoid Vacancy Loss

The first and most important factor that will determine how quickly and well your property leases is what we just discussed above, and that is setting the right price for the market. If you set the price too high, you will see very little activity on the home, regardless of performing adequate marketing for the listing.

Next, the most important factor in renting the home quickly is the marketing of the property. If potential renters do not know about the home, or cannot find it in the places where tenants are most commonly searching in 2023, your home will sit on the market much, much longer than necessary.

To properly market your rental home, we have compiled a variety of promotional tactics M&D implements that you should consider implementing as well:

  1. Great photos are an absolute must when marketing your rental property. Most potential renters search online when looking for a lease home. You will want to showcase the property in its best light and show people what they are getting when they lease your property. Make sure the property is clean, all the lights are on and blinds are opened, shoot at different angles and clean the windows before taking photos or hiring a professional to take the photos. You will also want to make sure the curb appeal is up to par, with a good power washing, make sure the lawn is cut, tree branches are trimmed and the front and back porches are spotless.
  2. A good, optimized property description is also important. You will want to highlight all of the home’s special features, layout and neighborhood amenities in order to entice people to rent your property over the competition’s. Be detailed and highlight the best features, mention updates and upgrades and include important policies that renter’s should be aware of, such as no pets or no smoking. Be descriptive and unique to make your property stand out among the hundreds it may be competing with in the city where it’s located.
  3. Advertise or list your property on third-party sites. These should include, at a minimum, Zillow, Trulia and Hotpads, which are free listing sources as well the MLS, apartments.com, realtor.com, Craigslist, Facebook marketplace and others.
  4. Create a video for the listing to showcase on social media. This is similar to a virtual tour and will be especially useful to people who are moving from far away – plus, videos get the most attention on social media and can be indexed for viewing on a Google Search. The property should be posted on all social media platforms, including local Facebook groups for the city where your property is located.

5. A good and easy showing system and tool is also important. Ensure the property is set up in a system such as Showing Time or Broker Bay via MLS. In addition, there is also always the option of doing Self-Guided Tours, which will also help you to gain traction and remove barriers for potential renters to see the property; tenants can schedule their viewings online and then use a temporary code to access the property.

FINAL THOUGHTS & RECOMMENDATIONS

A good property management company will perform all of the above in order to lease your property as quickly as possible and ensure you get a good return.

Duties of a property management company typically include setting the rental price based on all of their available resources, marketing the property through promotional efforts, including both paid and unpaid channels, handling all maintenance and repairs and budgeting for the property, ensuring the lease is enforced, performing regular inspections, collecting rent payments and so much more.

Property management companies typically charge a fee between 5% and 10% of rental income monthly based on the services they offer and the quality of the property management company. There may also be a small fee to lease the property for you, in addition to managing it.

Just think, on your $2,000 per month rental property, you may only pay an average of about $160 per month to not have to worry with any tenant screening, maintenance concerns, property issues, non-payment problems or concerns over whether you know enough to be legally compliant and correctly enforce your lease agreement.

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