When you decide to rent out your first property, the immediate goal becomes filling the vacancy with tenants. In order to list and market your property, you will first need to determine the rent price. Choosing a proper rent price will be important for running a profitable rental business as well as for attracting renters.
Below we will provide an overview of how to price your rental, including factors that affect price, how to add value to your listing price, and signs that you’ve priced your home wrong.
Is It Time To Rent Your House?
Once you’ve taken the proper steps to become a landlord, it’s time to evaluate your properties and decide which houses are prime for renting. There are a variety of reasons to rent your house:
- You haven’t built enough equity to sell the property
- You are looking to invest and purchase multiple properties
- To earn an additional income stream income or pay off your mortgage
Renting your property is a big decision, it’s important that you’re truly ready — use the questions below to get an idea of where you’re at and how you feel:
- Do you have the time to be a responsible and responsive landlord?
- Have you followed the correct procedures to become a landlord?
- Are you financially prepared to pay the mortgage if your tenant moves out without notice?
- Is your home in need of a lot of repairs before you can rent it? Can you afford them? How long will they take?
- Are you equipped to handle negligent tenants who could damage your property?
If your answers were trending towards “no,” it might be a sign that you have more prep work to do before you should rent out your home. If you mostly answered “yes,” you’re probably ready to price your home, get it listed, and take on the challenges and responsibilities of being a landlord.
How Much Should You Charge For Rent?
There are two overarching factors that come into play when pricing your home property: the external factors (surrounding market) and internal factors (your property’s features). It’s crucial to understand that you want to find the right price, not the highest price.
- Price it too low and you leave potential profit on the table
- Price it too high and you won’t generate qualified interest
Many people just have profit on their minds and don’t consider the fact that setting the right price will attract a larger pool of candidates and usually produce a more qualified tenant to rent the property.
One Percent Rule
A good rule of thumb to get you started is to use the “one percent rule,” this states that your rental price should be approximately 1 percent (specifically from 0.8 percent to 1.1 percent) of your property’s current value. While this is a well-known method for rent pricing, it is not always accurate to the market your home is located in and shouldn’t be used alone.
There are many other factors that come into play when pricing your rent. Learn about those internal and external factors below.
External Pricing Factors: Your Rental Market
It’s crucial to know your market when pricing your rental home. There are so many factors that come into play when pricing your rental which vary depending on your region — from sunny Floridian rental properties to rainy rentals in Washington there are different trends and features renters are looking for.
Check Online Listings
Perusing online listings in your area is the first step to get an idea of where your listing price sweet spot is. Keep an eye out for how long the listing has been posted; if there are properties that have been up for over a month (depending on your area) that could be an indicator that those prices are too high. The sites below are a great way to gauge the market in your area.
- Facebook Marketplace
- Apartment List
When you are comparing rent prices, take note of a few different factors.
- The number of bedrooms
- The number of bathrooms
- The size of the property and outdoor living space
- Pet policies
- Included amenities
- Age and condition of the property
As you take note of the prices of other properties in the area, search for properties that are as similar as possible to yours. While it may be hard to find a property with the exact specifications of yours, you can at least find enough properties with similarities to make an educated pricing decision.
Consider the Time of Year
It is also important to understand the seasonality of renting and the demand for your area when you put your property on the market. If you are in a high demand area, your pricing might be able to land a little higher. If, however, you are renting your property during the slow season, it may require a touch lower price.
- Slow Season: Winter
- Peak Season: Summer
Talk to an Expert
If you’re having doubts about your pricing or simply want an extra opinion, reach out to an expert in the field for assistance.
- Real Estate Associations: A lot of regions and cities have real estate associations that are accessible via their websites. You’ll often find free resources and some more in-depth reports for purchase.
- Real Estate Agents: Do you know someone in the real estate industry? It never hurts to ask for an expert opinion, as they have access to resources that help them set the pricing.
- Professional Rent Comparison Report: A rent comparison report is also an excellent time-saving method for pricing your property. Check out your personalized rent estimate to help you learn more about the area than just your own research.
The report can pull a large amount of data for your area quickly so you can stay ahead of the market and find your pricing sweet spot.
Internal Pricing Factors: Property Features
Internal property factors are just as important as, if not more than, the external factors listed above. There are some factors that are universally attractive to most buyers, while some are more niche but can help you pull in your ideal tenant. Understanding what increases the value and what doesn’t will help you market your property better.
Factors That Increase Value
The features shown below are great ones to highlight in your rental listing — they also indicate that you can price your home higher on the range of market prices (for properties of comparable size):
- Single-family home
- Convenient location
- Updated features
- Assigned parking
- On-site laundry
- Utilities included
- Extra amenities
Factors That Decrease Value
If your home has too many of the factors listed below, your home may fall on the lower end of market prices. If the factor is fixable, it may be worth investing a little time and money to remedy issues that could lower rent pricing.
- Multi-family home
- Inconvenient location
- Out-of-date components
- No guaranteed parking
- No laundry
- No utilities included
- Lacking ‘extras’ other homes have
How to Add Value to Your Rent Price
Once you’ve priced your home, you want to make sure that your listing justifies the price that you’re asking for. Below are some tips to gain tenant trust and drive the price you deserve.
Make an Emotional Connection
One of the best ways to make your property stand out is by creating an emotional tie to your home. Put yourself in the shoes of your ideal renter. Do they have kids? Do they care about entertainment nearby? Depending on who your property will appeal to, you’ll want to highlight those features.
- Help them envision themselves in your home.
- “I spent five terrific years in this apartment. My family is expanding so we’re reluctantly moving and looking for a great tenant to appreciate the property as much as we did!”
- Include flattering photography and videos.
- The quickest way to catch a tenant’s eye and garner their interest is with high-quality media that paints the property in the best light.
- Ease stress and decision anxiety.
- “As someone who was a renter for years, I know how important a responsive landlord is. I also have online payment options to help make your life easier.”
Include Value-Adding Buzzwords
There are certain words that jump off the page to renters and help add value to your rental price. See some of those words below:
- Furnished – If possible it’s great to give the tenant the option between furnished and unfurnished.
- Parking included – This is especially important in metropolitan areas where designated parking is rare, be sure to highlight it.
- Public transit access – Along the same vein, accessibility and convenience are great qualities to show off.
- Updated kitchen – A great kitchen is a huge plus for many buyers. Another phrase that works is “updated appliances.”
- Utilities included – Even if the rent is priced slightly higher to cover these costs it will still appear as a bonus to tenants.
Example Rent Pricing Process
To give you a better idea of how this process would work step-by-step, we’ve organized the different tips laid out above in an easy-to-follow sequence.
- Make Sure You’re Ready to Be a Landlord – Ask yourself if you’re ready to take on the responsibilities and if the timing is right to put your house up for rent.
- Estimate Your Rent Range Using the 1% Rule – For example’s sake, if the current home value is $300,000 the rent might land right around $3,000. The range is generally accepted as 0.8 percent to 1.1 percent of the total property value.
- Check Out Comparable Properties Online – Hit the various online listing sites to get an idea of the low end and high-end ranges of the rental market that you’re in. Make sure that you’re looking at homes with comparable features (number of rooms, neighborhood, square footage, etc.).
- Consider the Time of Year (Peak or Slow Season) – The time of year can have a considerable impact on how many people are going to be interested in your property. It’s typically easier to fill a home in the summer and harder in the winter.
- Evaluate Your Property’s Weakness and Strengths – On top of the basic features (number of rooms, neighborhood, square footage, etc.) look at what features could add value to your home as well as any that would detract value.
- Market Your Property and Highlight the Value-Adds – When writing up your listing make sure to highlight the features that add value to your home so you can justify your price and garner greater interest.
- Post Your Listing Across Various Platforms – Post your listing across multiple sites; TurboTenant helps you do this for free. Once you have applications coming in, make sure to properly screen the tenants.
- Reevaluate the Price by How The Market Reacts – After the listing has been up for a few days or a week, re-evaluate your listing based on the responses (or lack thereof). Read on to learn about incorrect pricing red flags and how to fix them to maximize your profits.
Signs That You’ve Priced Your Rent Wrong
Even after all the research you’ve done, it is sometimes difficult to know how the market will react. You should be willing to adjust your price if you experience some of the following warning signs.
Rent may be too high if:
- You get no inquiries about the property within a few days of listing your property (this of course depends on the desirability of your area).
- No one comes to see the property — you’re getting some lukewarm inquiries but no one is serious enough to come see the property.
- No one applies for the home – even if people are coming to see it there may be things that are turning them off to your property.
If this is the case for you it is probably time to lower the rent listing price. An alternative option would be to add value to the home by including expenses, like utilities, or fixing up the property by investing in updated appliances or an in-unit washer and dryer.
Rent may be too low if:
- You get bombarded with inquiries soon after posting the listing — some markets are so hot that a lot of queries are a given but if it’s higher than what you expected it could be a red flag.
- People are too eager having not seen the property yet – most people only start to get very serious after seeing the property in person.
- Prospective tenants are pushing to sign without asking you the proper questions – if they seem too eager it may be because they just stumbled on a deal.
These all indicate that people will still have a healthy amount of interest even if the price was higher, and you may be missing out on profits by pricing your property too low.
The real estate market fluctuates so it’s important to keep up with the rise and fall of prices in your neighborhood. TurboTenant offers a wide variety of free resources for landlords to help post your listing, screen tenants and manage your properties all in one place. Create a free account and try it out today!