Have you made the decision to rent out your home? One of the first questions you probably have is how much rent to charge. There are numerous factors that come into play when you are weighing this issue, however. For a landlord to achieve the most positive rental returns, it’s necessary to look at the property’s type, size, location, and demand. You can find some of this data on your own, such as the size of your property. Yet it’s also important to have a comprehensive understanding of local rental trends and yields in order to succeed, all of which can involve quite a bit of research.
One approach is to look at average rent data, and then use this to try and estimate an appropriate rental amount. However, this can be risky, and could have a negative impact on your returns. This is why it’s helpful to turn to a local real estate agent or property manager to help you before you put your rental property on the market.
An agent can perform a professional real estate appraisal on your property. They also have the ability to provide you with access to up to date rental data, including local trends and the number of days that rentals have been on the market. They may also help you market your property, but presenting it for rent.
Factors that Impact Rent
There are many features of the property that should be taken into consideration when you are working out the right rental amount. Location is extremely important. Properties in the same neighbourhood can potentially have more or less desirable locations that could impact rent. For example, imagine two nearly identical apartments on the same block. One is located above a busy restaurant and bar with late-night hours, and the other is located at the quiet far end of the street. Which do you think would be able to charge higher rent?
Other factors may include the following:
- Type of dwelling: Is the property detached, stand alone, or semi-detached?
- Number of bedrooms and bathrooms
- Size of the rooms
- Washing or drying facilities
- Swimming pool, gym, or other amenities
- Private garden or courtyard
- Covered onsite parking or garage
- Access to local conveniences, shops, schools, and transportation
- Overall property condition: Has it been recently updated?
These are just a few of the factors to consider when trying to determine a rental price. If your rent is different than other properties that have similar features and size, you may find yourself with a higher occupancy rate. In any case, the rent must be set at a marketable, realistic rate. You should try and distinguish between the rents asked by landlords and the rent that is actually paid by tenants.
After setting a rental price, you will then need to monitor the average number of days that a property spends on the market. If your property has been sitting on the market for a lengthy time period while other similar properties were rented, this could indicate that you might have set the price too high. You can monitor these figures with the help of a qualified real estate agent.
Pricing Traps to Avoid
The factors listed above should be taken into consideration to set a price, yet there are some other pitfalls to try and avoid.
Calculating rent based on your outgoing expenses
It’s only natural that you are trying to charge rent in the first place to help offset your expenses. However, tenants will have a firm budget in mind and will most likely rule out any place that doesn’t fit their needs.
Charging rent that is lower than the average property on the market
You may think that you’ll attract more tenants if you charge rent priced below the market average. However, this won’t necessarily garner you any grateful tenants. They will be more likely to respond favourably to reasonable rental policies.
Failing to adjust the rent over time
You must strive to stay on top of current rental prices each year to adjust your rent when necessary, or you will not be maximising your rental returns. Although it’s daunting to raise the rents on good tenants, reasonable rent increases will only reflect the market and are usually expected by tenants. It’s best to read more about your landlord rights as well as local tenancy guidelines and laws to stay on top of these issues.
A bit of trial and error may be involved in calculating rent, particularly for beginners. However, if you want to act more like a seasoned investor and increase your profits it’s better to seek out professional guidance and refer to the data that will help you narrow down your options. This will help you find an appropriate, accurate rent to charge. In any case, you’ll need to monitor the market and make changes along the way.