What to charge? It's an age-old question for anyone who has something to sell or, in the case of investment properties, something to rent.
The logic of capitalism tells us that the free market, supply and demand will guide the price of goods and services. So naturally, this extends to things like prices for real estate, including what a property can command for rent.
But, even with that knowledge in our back pocket, we must enter an actual dollar figure into our rental listings to get our properties occupied with a tenant paying rent.
List for too much, and your property may sit vacant, leaving you on the hook for the mortgage payment, monthly homeowners' association dues and utilities.
List for too little, and you may leave money on the table.
So, how do we determine market rent so we can get our investment properties occupied?
Knowing your competition is the most important rule of thumb in determining how much to charge for your rental property. People in the real estate world live and breathe knowing their "comps," and for good reason. If you have a two-bedroom home to rent, knowing how much a two-bedroom apartment nearby rents for will go a long way to helping you determine what to charge. A few simple online searches for rentals in your area are well worth your time and effort.
In the above example, consider your property's differences once you know the amount a nearby two-bedroom apartment costs. Maybe the apartment doesn't offer off-street parking, whereas your two-bedroom home has a driveway or a carport. The apartment complex may offer a gym, a pool or have certain utilities included, whereas your property does not have those amenities. Knowing the comp price is paramount to guiding your decision of what to charge for your property.
Here are another handful of factors to consider when determining what to charge for your rental property.
Location, Location, Location
This is the oldest one in the book. There are nearly unlimited factors that determine whether a location is considered desirable. For example, in the Cape Fear region, homes located on or near the water will fetch a vastly higher rent than homes in other parts of our area. There are also many other factors to consider, such as school districts and crime rates, as well as proximity to city centers, popular shopping areas, universities and business districts.
No matter how great you feel your property may be, there will be a maximum amount you can charge. For example, your beautifully renovated, one-bedroom bungalow almost certainly will not command more in rent than an unrenovated three-bedroom home on the same block. Square footage and the number of bedrooms and bathrooms in the property will be a major factor in how much you can command for rent.
Amenities and Property Condition
Contrary to the above example of a beautifully renovated one-bedroom bungalow not commanding as much as an unrenovated three-bedroom on the same block, amenities and the condition of your property can help you command a higher rent. The renovated one-bedroom home should command more rent than a similarly sized, unrenovated nearby property. Other factors in this vein may be a great view, desirable outdoor space, a gas fireplace or central air conditioning. The more amenities your property offers compared to your nearby comps will go a long way in helping determine what to charge.
As a leading property management firm in the Cape Fear region, Sweyer Property Management certainly recommends that property owners strongly consider working with a trusted and experienced property management company. Whether it pertains to determining rental rates or another area of handling your investment properties, we want to make sure property owners and investors understand the relationship they are entering into when choosing to work with a property management firm.
If you have investment properties and do not use a professional management company, we hope you consider doing so. The experts at Sweyer Property Management will be happy to provide you with a free rental analysis or, if you prefer, give us a call at 910-256-3031.
Sweyer Property Management is a full-service professional property management company that specializes in all aspects of rental management. If you're an investor or property owner looking to learn more about our services and what a professional property manager can do for you, reach out to us today at 910.256.3031 or via our website. Sweyer Property Management has exhibited continuous growth throughout the Wilmington, Leland and Hampstead areas while maintaining an excellent Google+ rating for customer service.