Determining how much to charge for rent can be tricky. However, taking some time to work out what the optimal amount of rent is, will ensure that you find tenants faster. To evaluate your rental, you will have to consider many of the same things that real estate agents do when pricing a property.
It’s well worth taking the time to price your rental correctly as it will help you avoid extended vacancy periods and increased vacancy costs. However, before you take other factors into consideration, consider the current state of your local real estate market and compare rental prices to other properties, and then you can start considering all of the following:
Equivalent Rental Prices In The Area:
By considering this factor, you can get a real sense of the market in your local area. This is the most significant point to consider as an apartment’s surface area does not dictate the price alone. To better illustrate this, here is an example: a 1,000 square foot apartment might rent for $800 in Oklahoma and $3,500 in New York City. Yes, other factors are essential, but not as much as the competition and demand in the area.
The Baseline Amount Of Rent
While the market will impact what landlords can get for their rental, it’s key for a landlord to know what they need baseline rent to be to cover their expenses. Landlords have to pay taxes, homeowners insurance, mortgages (in some cases), and a handful of other maintenance and carrying costs. Therefore, it’s important to calculate this monthly amount to make sure rent will cover these costs. Unfortunately, this is a factor as landlords cannot set the rent based on the ROI they want. They NEED to consider the baseline amount of rent they need to charge in order to cover their own expenses.
The Surface Area And The Number Of Rooms
One of the main things that you should consider when deciding on the amount of rent is the square footage of the property and the number of rooms. Usually, the rent is calculated in proportion to the surface area and the number of rooms on the property. So, using these metrics, you can start looking into how much the rent per square in your region is. For example, the rent in Brooklyn is a bit over $2 per square foot. You can get a rough estimate of how much you can charge for your rental from such information.
The Property’s Location
The location of the rental is one of the biggest determining factors when it comes to how much rent people would be willing to pay. A property close to the city center and major roads or one that enjoys a pleasant view has greater value than one that is located far from the city center in the outskirts. Likewise, homes near schools, shopping centers, and subway stations are priced a lot higher.
The Elevation Of The Property
The higher the floor, the brighter the property, the more the rent increases. This is especially important in big cities where the lower floors don’t have much of a view as other buildings block them. But despite the fantastic views that you can get from an apartment situated on the top floor, the absence of an elevator can be seen as a disadvantage, especially for the elderly and families with small children. Carrying heavy shopping bags and pushing a stroller up the stairs isn’t convenient. Therefore, the presence of an elevator is taken into account when choosing the amount of rent.
The Condition Of The Property
The quality of the accommodation and the building in which the property is located is crucial. More specifically, consider the state of the facade, the interior, and the materials used are important criteria. On the other hand, people would be willing to pay more for a building with a security system or one benefiting from a functional layout (like a fully equipped kitchen). Finally, the rent may fluctuate depending on whether there is work to be done (for example, if the kitchen needs to be renovated).
The Presence Of A Private Outdoor Space
The rent is inevitably higher if there is a balcony, a terrace, or a garden: these outdoor spaces are particularly sought after and appreciated in urban areas. An outdoor space is valued as it is ideal for pets, gardening, and outdoor activities.
The Availability Of A Private Parking Space
In most major cities, having a personal parking space is a real asset, but in smaller, more rural towns, this won’t have a drastic impact on the value of the property. Having a private parking space is especially nice if you live in a major city, as one of the biggest hurdles of city life is finding a place to park your car.
Furnished Or Unfurnished
In general, tenants are willing to pay more for a furnished rental with all the necessary appliances. An interesting statistic to keep in mind is that furnished rentals are more often vacant because they are rented for shorter periods of time, but on the other hand, rent is higher for furnished rentals when compared to empty rentals.
Insulation
This is one of the most undervalued factors when it comes to rentals as it has a clear influence on the price of rent because, if the home is well insulated, it will generate lower electricity and heating costs.
What Other Factors Should You Consider When Deciding The Rent Amount?
You cannot decide on the amount of rent solely based on the factors listed above. In addition to those factors, you need to consider the current local market conditions, as rental prices are highly subjective. For example, an apartment with an estimated rental price of $500 in Kansas could be worth up to $3500 in NYC, due to that, you need to consider both the demand as well as the competition.
It is important to consult listings for similar rentals in the area. This can be done through a real estate agent who can shed light on the amount of rent charged on average since they know perfectly the market, the disadvantages, and the advantages of each property.
In addition, there are other rental costs that you need to consider when drafting a lease agreement: water consumption, security, elevator, maintenance of common areas, garbage removal, sweeping tax, etc. In your lease, you can make it clear who bears what costs and adjust the rent accordingly.
Finally, if you want to ensure that your potential tenants can actually pay rent, you should consider properly screening your tenants to know more about their financial standing.
