You want to make a profit with your rental property.
You want to be competitive.
You want to entice tenants that you are the best.
You want to be known for having an outstanding rental property.
There is much to balance when it comes to setting the monthly rent amount for your Potomac rental property, and it can be exhausting, to say the least.
If you price it too high, your vacancy rates skyrocket.
If you price it too low, you risk losing money.
So how do you go about deciding what the perfect rental price is for your valuable Montgomery County rental property?
Finding the rental price sweet spot can be challenging if you are not sure how to go about deciding on a firm amount.
And, since you have a mortgage, taxes, insurance, and repairs to pay for, not to mention the fact that you are in the rental property business to make a profit, understanding how to set your rental property’s monthly rent rates is crucial to your success as a property owner.
Luckily, today we are sharing 5 exceptional tips to help you set your property’s rental price.
How to Determine Your Potomac Rental Property Price
1. Evaluate Your Property’s Amenities
You should always set your rental property’s monthly rent rate based on how desirable it is to tenants looking for a property similar to what you own.
If you base your prices on generic characteristics such as how many bedrooms the property has, or whether it has 2 or 3 bathrooms, you are likely to come up short when it comes to positive cash flow.
Instead, evaluate your property based on things such as:
- Updates and Improvements. Appliances, flooring, landscaping, and other amenities are highly desirable amongst prospective tenants.
- Is it one or two stories? Does it have an elongated layout, or is it more mix-and-match with varying levels? Describing your property’s layout in detail will garner more interest from interested tenants.
- Storage Space. People love extra closets, built-in organizers, and garage space. Highlight these things, and as a result, ask for more rent thanks to these amenities.
- Square Footage. The more square footage your property has, the better.
In addition, you can take into account things such as included utilities, safe neighborhoods, nearby public transportation, separate or private entrances, off-street or garage parking, and even the fact that your unit is on the first floor, which can be more desirable in some places.
Depending on your property’s amenities, you will be able to determine whether you can charge more per month for rent than a neighboring property that is of a similar style and layout.
2. Do the Math
Many Montgomery County property managers suggest, calculating 1.1 percent of your property’s value to determine a super simple starting point.
In addition, for those with expensive properties, staying closer to 0.8% of the purchase price is common when determining a rent price.
Utilize Square Footage
If you want to take it one step further, calculate how much neighboring properties are going for based on their square footage, and then do the same for your property.
To do this, simply divide the monthly rental price by the square footage of the property.
Just keep in mind that smaller properties typically rent for more per square foot than larger properties.
And remember, these calculations are simply starting points for determining rent rates.
They do not take into account things such as amenities, competition, market rates, location, employment rates, and more.
3. Research Your Competition
Look at where your property is located and measure it up against others in the surrounding area.
How does yours compare?
In the end, competition will affect how much you can ask for each month in rent.
Here are some things to consider:
- Check online ads and newspapers to see what similar properties in your area are going for
- Notice excessive incentives, and make note of the oversaturation in your area
- Ask local realtors or other landlords you can trust what you think is a fair rent amount
- Compare your property’s amenities to similar properties, and either add or subtract from your starting monthly rent based on your findings
- Ask around for vacancy rates of similar properties, and adjust your rent price accordingly
- Check out useful tools such as this calculator from Zillow to give you an idea of going rent rates in your area
It is best to have a starting point and then work your way up or down, depending on the factors mentioned above.
The more demand you can create for your property, the more rent you can command from tenants.
The key is finding what makes your property better than the others, and advertising that to potential tenants.
4. Determine Your Profit Margin
Property owners seek to maximize on their rentals in terms of profit.
After all, that’s why people get into the rental property business.
However, everyone’s idea of profit is different.
Thus, it’s important to decide your base profit margin, and work your way up from there.
Don’t know what your base profit margin is?
Start with this:
- Monthly mortgage amount
- Maintenance and repair costs
- Insurance costs
At minimum, the monthly rent you charge your Potomac tenants should cover these costs.
If not, you could easily find yourself dipping into your own pocket to cover the costs, and eventually end up in a financial crisis.
In addition to covering these costs, it is a good idea to calculate that you want to profit approximately 6-8% of the monthly rent amount each month.
This is a reasonable expectation, and should not hinder most tenants from wanting to lease from you.
5. Enlist the Help of a Property Management Company
If you have tried to make the best of all of the above-mentioned tips, and still feel like you are not sure what to set your Montgomery County rental property’s rental price at, get in touch with Maryland’s best property management company, Bay Management Group, and let us help you.
Dealing solely in the management of rental properties, Bay Management Group offers property owners all the help they could need when it comes to leasing a vacant property:
- Aggressive marketing of vacant properties across multiple channels – major search engines, online classifieds, direct mail, and other helpful online sites
- Advanced advertisement of vacant properties, highlighting every unique detail and commanding the highest rent possible
- Complete tenant screening and lease drafting services
And this is just the beginning.
The staff at Bay Management Group understands what it takes to lease properties for a profit, and will help you to do just that by hitting the market hard, finding only the best tenants that are willing to pay for a property worth a high rent, and keeping them there long-term.
If are looking for the best when it comes to property management, contact Bay Management Group today.