Determining Market Rents
A challenge many landlords face is what they should be charging for rent. When you need to determine rents, it can be a fine line between charging too much, or charging too little.
If you charge too much you end up with more vacancies, higher turnover and ultimately less profits.
If you charge too little you may end up with tenants staying longer leading to fewer vacancies, but ultimately also getting less profits.
Part of operating a successful landlord business is finding that sweet spot where you’re not too high and you’re not too low.
Many landlords wish there was some sort of tool that could help them with this and fortunately there is!
It’s a website called Rentometer.com and I’ve been using it for years to determine rents for my properties, to see how I compare and even to see trends over time.
Of course you shouldn’t limit yourself to just one source, there are multiple other ways you can get this info as well, or to help provide you with multiple comparisons just in case one is off a tad.
Fortunately for you, the president of Rentometer Mike Lapsley, provided me an article he wrote walking you through some steps to help you confidently set your rents. Here’s the article with some additional info about Mike and Rentometer for you! Be sure to leave him (and/or me) a comment.
5 Ways to Help You Confidently Set Rents
BY MIKE LAPSLEY ON FEBRUARY 23, 2015
The rental housing business is very local and it takes time and effort to understand a local market and all the nuances that go with it. Many variables can impact the rent you can charge for your rental unit including: location, building structure, amenities, age of unit, market conditions, etc. The subjective and local nature of many of these variables make it difficult for anyone to tell you exactly the right rent for your rental unit.
However, having said all that, there are some things you can do to help you more confidently set your rents. Below are a few ideas to help you set rents for your rental property:
1. Stay up to date on local economic and business activity in your market because economic activity is one of the key drivers of housing demand including rental housing.
2. Work with local real estate professionals – property managers, brokers, agents, appraisers, and lenders. Local experts are especially good at identifying the drivers of housing supply and demand unique to your market – jobs, local ordinances, zoning, etc.
3. Check local apartment listings using the local newspaper, apartment guides, Craigs List, and of course Rentometer (shameless plug!).
4. Check your local apartment or rental housing association for research and other information they may provide about local rent levels – past, present, and future.
5. Use “rent per square foot” whenever possible as a benchmark. This allows you to encapsulate into a single number all the subjective variables of rent and provides you a basis for comparison across different units, locations, amenities, etc.
The task of setting rents can be done more confidently with good current and historical data, as well as a thorough understanding of the local market and current market conditions.
Mike Lapsley is the President of Rentometer.com. You can reach Mike at: mike@rentometer.com Learn more about Mike here.
About Rentometer
Used by tens of thousands every month, the Rentometer provides rent comparison data and analysis through a simple, intuitive user interface. Everyone from landlords, property managers, owners, and renters can research and compare rental rates on Rentometer.com. Rentometer offers a basic free version as well as Rentometer Pro for users that need more detailed info, a professionally printed report, as well as additional tools to analyze the data. For more information, please visit www.rentometer.com, find them on Facebook at www.facebook.com/rentometer or on Twitter @Rentometer.
I use the same website but if i know i want to fill my vacancy fast I set the rent ten dollars less than the lowest part of the range. People always need to feel like they are getting a deal.
Hi Tosha,
Thanks for the feedback. Now here’s an observation I’ve made over the years, I rarely charge what everyone else charges. I tend to charge more.
What I found out very early is by making my properties nicer (at least in my opinion), I could charge above market rents. Now I;m not saying double, but at least 10% more usually. By charging more it accomplished a couple things.
One, it automatically weeded out the lowest paying tenant. In my mindset and throughout my varying occupations I learned that the people looking for the cheapest option generally weren’t the clients I wanted. They bought on price and no relationships were involved so ultimately if next time they were buying they went somewhere else because they could save a dollar.
I would rather provide superior service, work harder to find better clients who would appreciate this and ultimately create long term relationships. Same can be said for my tenants and thats why I end up with tenants that stay longer and ultimately reduce turnover.
Two, the tenants who tend to pay a little bit more may be more demanding , but they can also typically afford a bit more and take a bit more pride in both the property and the fact they can pay more, so they tend to take better care of the property.
Now having said this, there are people who don’t fit this profile and cause more headaches and havoc, but as a general rule there are simply more headaches with lower paying tenants.
Bill