How to Set Rental Pricing

August 28, 2020

There’s an art to setting rental pricing. According to The Balance Small Business, this basic rule of thumb applies: when the economy is bad, the demand for rentals can go up because people can no longer afford their homes and find they have no choice but to rent. A bad economy can also cause a greater demand for smaller, cheaper apartments because people have to downsize. Another example is, in the summer, the demand for larger apartments increases because families are trying to move before the school year starts.

How to Set Rental Pricing

It is an art to set rental pricing because of many factors. Not only do you want to check comparable rental listings in your local newspaper, online and on Craigslist, but several things can affect the price:

  • View– Apartments with a garden view are more desirable than those with a view of the parking lot.
  • Updates– Units with updated appliances, hardwood floors, or other amenities are more desirable.
  • Square Footage– A 1,000 square foot one bedroom is more desirable than a 700 square foot one bedroom.
  • Layout– Railroad style apartments are less desirable than other floor plans.
  • Floor Level– Higher floors are more desirable. The exception is a walk-up, where after the third floor, you will have to start lowering the price because people will not want to go up and down the stairs.
  • Extras– An extra closet, balcony or window makes a unit more desirable.

Then we have geography. Rental prices are higher in more desirable parts of town. You can obtain the addresses for similar rental properties, particularly those properties with the same approximate value as your properties. Use the information to identify how geographic area affects rent prices. Consider geographic factors such as proximity to shopping malls, golf courses, roads, parks, and schools. Renters might pay a premium for properties when they are in attractive settings.

Cover All of Your Expenses

Everyone has a different goal when owning property. Regardless of your goal, the right rent should, at a minimum, be enough to cover all of your expenses for the property. The rent should cover:

  • Your principal, interest, taxes, and insurance (PITI0
  • Maintenance and repairs on the property and utilities
  • Vacancy costs. When there is a vacancy at an investment property, you do not have any cash flow from rental payments, resulting in you losing money for every month a rental home is vacant.

Finally, after you have settled on pricing per unit and are advertising its availability if you receive few calls, you will need to lower the rent you are asking. Conversely, increase rent prices if you receive many calls on properties.

Jane Perillo
2700 Kirkwood Highway
Newark, DE 19711
(302) 995-2535
(302) 995-2550 fax

Tenant Screening Made Easy:

Photo by Erik Mclean on Unsplash


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