Setting the right price for your rental property is a massive part of running a successful rental business. However, it’s not as easy as it sounds. Pricing a rental property fairly takes time, research, and resources. After all, you don’t want to miss out on profits by either setting your rent too low or too high. If you’re unsure what factors go into pricing a rental property, keep reading as we go over the basics.
Considerations for Pricing a Rental Property
If you’re a landlord, you know how nice it would be to set any price you wanted for your rental. However, that’s not exactly how it works. The local market is the ultimate ruling factor for pricing a rental property.
That said, there are also additional factors to consider for landlords to set a competitive rental rate. Here are some further considerations:
- Who is Your Competition?
- Can You Cover Expenses?
- How is the Market Performing?
- Are People Interested in the Property?
Who is Your Competition?
The first bit of research you should do before settling on a rental price is to look at your competition. What are other similar rental properties going for? It’s essential to look at properties comparable to yours, preferably within the same area as yours.
When looking at other properties, check out the location, how many bedrooms they have, and the square footage. Additionally, look at their amenities and stand-out features. Here are a few desirable features to look for:
- Upgraded appliances
- Washer and drier
- Ideal parking situation
- Nearby entertainment
- Finished basement
Can You Cover the Expenses?
Ultimately, profit is the goal of any rental property. However, to make a solid profit, you need to be able to cover the expenses first and foremost. The monthly rent should be enough to cover at least the property’s mortgage.
If you’re unable to pay your bills with the monthly rental income, something is going wrong. Additionally, you should also save a percentage of rental income for emergencies or future vacancy costs. If this isn’t working out for you, it’s time to reevaluate your rent price and see where you can improve.
How is the Market Performing?
The market is another significant deciding factor in pricing a rental property. If the demand is high and the supply is low, prices will typically increase. On the other hand, if the demand is low and the supply is high, sometimes landlords have to lower rent prices.
Keep in mind that your location can seasonally affect rental prices in your area. For example, if your rental is in a college town, you’ll likely see an influx of people interested in your property around the start of each semester. Use these times to your advantage and set your rental price competitively.
Are People Interested in the Property?
You could have one of the best rental properties in the area, but you’re not getting anywhere if no one is interested. That said, if you aren’t getting any inquiries about your rental property, sit down with your property managers in Washington DC and take a look at your pricing.
After all, pricing is one of the largest deciding factors for tenants looking for a rental. So, don’t be afraid to take a second look at your competition and reevaluate your rental rates.
How Does the Market Demand Affect Rental Property Pricing?
The local market is the largest factor that affects the pricing of a rental property. After all, supply and demand affect almost any market, including the rental market. When the supply is low and the demand is high, it’s called a seller’s market. On the other hand, when the supply is high and the demand is low, it’s a buyer’s market. Since the start of the COVID-19 pandemic, we’ve been experiencing a pretty heavy seller’s market.
In a seller’s market, homes sell quicker, and rentals become occupied faster, so home and rental prices tend to skyrocket. To set a fair rental price, it’s important to consider the stand-out factors of your rental property and check out the competition in your neighborhood. Next, we’ll go over some of the main factors to consider when pricing a rental property.
What Main Factors Determine Rental Value?
Once you’ve considered your competition, property expenses, the local market, and property interest, consider the main factors. Factors like location, curb appeal, bedrooms, appliances, and pet policies can further help you determine your rental value.
- Curb Appeal
- Number of Bedrooms and Bathrooms
- Appliances and Amenities
- Pet Policies
Location is one of the biggest factors in setting rental rates in Washington DC. Homes near restaurants, shopping centers, gyms, and entertainment may be subject to higher rental prices. Additionally, properties in desirable locations will have a more elevated pool of interested tenants if they are priced right.
The curb appeal of your property is another significant factor in setting rent prices. If your property doesn’t look desirable from the outside, tenants likely won’t be willing to pay a high rental rate. If you want to set your rental rates competitively, make sure you work on the curb appeal of your property.
Number of Bedrooms and Bathrooms
The number of bedrooms and bathrooms are two desirable factors of a rental property. The more bedrooms you have, the more you can likely charge for rent. Additionally, everyone wants more bathrooms in their home, so this could be a huge selling factor. Before setting a price, look at other rentals with a similar number of bedrooms and bathrooms.
Appliances and Amenities
The better your appliances and amenities, the more desirable your rental will be. Updated appliances that add a modern touch to rental properties are typically significant for renters. Additionally, excellent amenities are another huge factor for renters. For example, a washer and drier, upgraded flooring, and security features can make a difference in pricing your rental property.
Many people these days have pets, and many rentals tend not to allow pets. However, allowing pets might allow you to set rental prices a bit higher. After all, you can charge a pet cleaning fee or a pet deposit and an extra monthly pet fee if you feel it’s necessary. If you’re not sure
Set Your Home Apart From Competitor Rentals
While setting your rates at competitive levels, you’ll want to find a way to stand out from your neighboring rentals. After all, the goal of any landlord is to avoid vacancies and maximize profits. So, you have to set yourself apart from competitor rentals. Here’s how you can do so.
- Work on Curb Appeal- If potential renters immediately don’t like what they see when they drive past your rental property, there may be a problem. After all, nobody wants to pay high rent prices for a property that doesn’t look good from the outside.
- Provide Security Features- Security features can help you stand out against other rentals in your area. Ensuring that your tenants feel safe is essential and can be a huge selling factor for your rental.
- Consider Allowing Pets- If you decide to allow pets in your rental property, you’ll likely have more people interested in renting from you. In addition, since most people these days have pets, they’ll probably consider paying more to live in a pet-friendly rental.
Maximize Your Rental Business With Property Management
Pricing a rental property is only half the battle. Maintaining it and running a successful rental business is equally as important. But are you stressed with the daily, monthly, and yearly tasks of owning a rental property? Need help with maintenance, tenant screening, rent collection, and more? Don’t worry–your local property management team is available to help you out.
Bay Property Management Group has the right rental experts to help you succeed. Contact us today if you need management services in Baltimore, Philadelphia, Northern Virginia, Washington DC, and other surrounding counties.