How much rent should you charge the tenant at your rental property?
Today I talk about the strategy to price a rental property, how to find the market price by reviewing comps, and when to make price adjustments. We all want to know how much rent will that investment property get!
Let’s talk about the strategy of pricing. A rental property should not take more than 30 days on the market to get a signed lease. Pricing your rental too high will cost you in vacancy expense. Remember, each week of vacancy can cost you approximately $600-$1,000 a week.
We use a mixture of rental comps and industry expertise to give you a price recommendation. Side note, we here at TrueDoor are always happy to give you a free rent price report, just ask us.
Rental comps means we are looking at comparable rental properties in the neighborhood that have similar characteristics and have rented out recently. We use different sources for reviewing rental comps, such as online providers like Zillow and RentRange, we also use 3rd party data providers and the MLS, as well as all the properties we currently manage.
When looking at rental comps, make sure you are comparing properties in the same area. The comps should be close in square footage and have similar amenities. Also make sure you are comparing properties that have already been leased. You might see your neighbor asking for a certain price, but it doesn’t mean they’ll get it.
What if you want to ask for an above market price? We can do this, but please be aware that you should be willing to lower the price after the first week. If a vacant property doesn’t get at least two showings in the first week, that’s an indicator that it’s not going to rent at that price.
What about pricing it above the market to leave room for negotiation? For reasons that I don’t know, there is very little negotiation in the world of rental property. Most potential tenants see a listed price for a rental and don’t bother to ask if the owner will take a lower price. This culture can hurt you if you are pricing your rental too high.
When pricing your rental, take into consideration how much demand is in the market. For an area or type of property that has high demand, you can price it slightly higher than comparable properties. We just have to be careful to make price adjustments early in the listing if the property doesn’t get the correct amount of activity.
Please consider that getting a tenant quickly has a lot of value. If you have a $3,000 rental, you are losing a lot of money if it’s empty. Remember! We will be raising the rent each year anyway. We have clients that get set on a single price and could make more money by pricing the place correctly, then making the correct rent increases each year.
In conclusion, we all want to get the most rent possible. Let us know if you need help pricing your rental.