Calculating a Fair Rental Price

By Ashley Paskill on June 17, 2023

Setting a rent price for your rental properties can be challenging. You want to be sure that you are covering any expenses you have, but you also want to be fair to current and future tenants. It can be difficult to find a happy medium between the two. However, if you know what factors to include and how to calculate everything, finding a price that is fair yet sufficient can be done.

2% Rule

If you are renting a single unit, many renters recommend setting the rent at a 2% maximum of the property’s total value each month. However, for multi-units, this rule becomes complicated as you will have to calculate how much each individual unit will cost, and that does not factor in other amenities you may offer. While it is a bit complicated, it is a solid rule to base your monthly rent price on. With minor adjustments where needed, you can make it work for your property.

Know your competition

When determining a fair price for your rental property, see what your competition is doing and charging. If you are way above what others are charging monthly, you are not being fair to your tenants and they are likely to rent elsewhere. However, if you are charging way below what others are, you may have a waiting list of tenants, but you may not be fair to yourself and you may be struggling to make ends meet on your side of things. Do some research on apartment rental sites to see what properties of a similar size that offer similar amenities charge and adjust accordingly if needed.

Bedrooms and bathrooms

Generally, the more bedrooms and bathrooms a property or unit has, the more expensive it will be. A one-bathroom studio apartment, for example, will be a significantly lower rental price than a three-bedroom, two-bathroom house. With bathrooms, you also have to factor in the possibility of a half-bathroom, which contains only a sink and a toilet. For larger properties, you may be renting to multiple families or tenants who will share rooms and bathrooms, so you will have to adjust the rental price accordingly.

Image: Curtis Adams via https://www.pexels.com/photo/white-ceramic-bathtub-near-white-ceramic-bathtub-3288104/

Perks and amenities

Many renters look to see what kinds of perks and amenities you offer on the property. These can be anything from in-unit laundry services and free Wi-Fi to a pool and a parking spot. If you offer perks that are in demand, it is okay to charge a bit more per month, especially if the cost is in line with what your competition is charging. You may be overcharging if you do not offer these kinds of perks and amenities but competitors who are charging a similar price. Many perks, like a pool and Wi-Fi, will cost you money, so you have to make sure your income is able to cover them sufficiently.

Year built and year remodeled

Oftentimes, newer buildings tend to have higher rental prices than older buildings. This is not always the case. There are instances where people have trouble settling into a newer building out of fear that things can go wrong that have not happened yet. They may also prefer the look and feel of the older spaces. Many new buildings tend to look the same, while older buildings are different and have character. This is where knowing your competition as well as the community you are in comes in handy.

Similarly, places that have been newly remodeled with new amenities and appliances tend to have a higher rent. People who are used to living in older places that look their age can appreciate the newer look and updated appliances they want to use. Again, knowing what other renters are doing and when they last remodeled can help you stay competitive and attract new tenants.

Upkeep costs

When you are trying to figure out a fair price for your rental property, it is important to keep in mind that you need the price to be fair for you and your own expenses. Take some time to calculate how much you spend on upkeep for the property. This can include cleaning services, regular maintenance, lawn, and landscaping services, and general utilities that renters are not responsible for.

Other property and life expenses

As a property manager, you likely have insurance to cover your spaces should something happen, so you need money to pay for the insurance. There may be other miscellaneous expenses, such as marketing, that come with the property that you need to pay. You also need to ensure that you are able to make an income for yourself and any employees that work for you. Be sure you are able to factor all of these into the rent and if you are struggling to do so, reevaluate the cost of your rent and make a careful decision.

When calculating a fair rent, make sure both you and your renters are taken into consideration as you are all important in the decision.

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