When you own or manage a rental property, your success hinges on renting out the property rented at a rate that earns you a profit. But how do you know what rate the market will bear – and provide the desired cash flow to cover your mortgage and expenses?
1. How does location affect rental rates?
When researching rents to determine where your property fits into the spectrum, you want to understand the historical rents in the area, how other similar rental properties compare, the tenant base, safety, and amenities in the community.
2. What are other property managers charging for rent in that area?
It's important to know what other landlords are charging in order to keep your rental rates competitive. Keep in mind this should only be a baseline. Your property may be larger, more up to date, and have a better view or access to services in the area than another property.
3. How safe is the neighborhood?
If your tenants don't feel safe, they may not stay in the neighborhood. For instance, if the area has a high crime rate or is near noisy, busy intersections, you may have a hard time attracting tenants.
4. Is your property close to everyday public services?
The neighborhood's walkability plays an important role in how attractive it is to potential tenants.
5. How does rental property affect rental rates?
An updated property will command more in rent, while a dated property that has seen better days and needs a lot of work will bring in a lower rent rate. The condition of the property does matter.
6. Does your property include special amenities or extras?
Most rental properties come with appliances; if yours does not, and your tenants need to provide their own, they will not be willing to pay top dollar for rent.
When you set your rents, do your research first and keep in mind that you can always start out asking for a little above average rate to see what the market will bear.