You’ve just purchased a rental property, but before you can start recruiting tenants, you’ll need to decide how much to charge for rent. Setting a reasonable rental price is extremely important; charge too much and you won’t get any rental applications. Charge too little and you’ll fail to make a profit.
By taking a few factors into consideration, you’ll be able to set the right rental rate with confidence.
Maintenance and Upkeep
Start by considering your immediate and long-term maintenance costs. This should include not only expenses you can plan for (such as landscaping and general maintenance), but unplanned expenses as well. This can include anything from a burst pipe with water damage to removal of a dead tree.
Lost Income Between Tenants
You’ll also want to consider potential losses when you have vacancies in your rental unit(s). While a unit sits empty, you’re losing money because you’re not collecting rent but you’re still paying to keep the unit maintained. The smaller the turnover time between tenants, the better off you’ll be financially. Still, you should plan accordingly in case you end up with a gap of a couple of weeks or even a full month of vacancy.
Area Rental Prices
Make sure your rental rates are competitive with similar properties nearby. There are plenty of resources for researching area rental rates, including sites Rentometer, which will help you determine if you’re charging too much or too little based on area prices.
No matter what you end up deciding to charge for rent, consider how a property management company can help you optimize your earnings. Property management companies can handle things like routine and emergency maintenance, as well as finding new tenants to fill vacancies–all for a predictable monthly cost. Could hiring a property management company be beneficial to your rental property?