Setting the rent price correctly is very important for the success of your rental business. Being a Nashville property management company, we are well aware of how critical it is to set the proper rent prices.
If you set the monthly rent price too high, you may have a hard time finding tenants to occupy your property. If you set the rent price too low, you may not be able to cover your expenses or earn income.
We have determined four different methods that you can use to set an accurate and reasonable monthly rent price for your rental property.
1. Use Your Property’s Value
Calculating 1.1% of the value of your property is a great starting point to determine the monthly rent price. For example, if your property is worth $100,000, multiply that value by 0.011. This equation provides the value of $1,100 for a monthly rental price.
This calculation is simply a guideline for a good place to start. This calculation has limitations and there are other factors that can add or take away from the rental value of your property. Location, nearby amenities, layout, and design features affect the rental price.
As always, you should consider the rental market when determining your rental price. If your property is located in a competitive market with plenty of other rental properties available, this price may be too high to compete with the other options.
2. Research Comparable Units
Another way to determine a rental price is to look at the rent price for comparable units in the area. You can look for these properties online, or drive around your neighbourhood. Make sure you only compare units that have a similar square footage, number of bedrooms and bathrooms, amenities and location.
3. Calculate the Rent per Square Foot
If you are having difficulty finding similarly sized units in the area, you can use the square footage to determine the rental price. This method can help you compare rental properties in the area, regardless of their size.
For example, if you have a 1,500 square-foot unit available, and a nearby 1,000 square-foot unit is renting for $1,250 per month, you can use this property to help determine your rental price. Divide the monthly rent by the square-feet, and this will give you a price per square foot.
$1,250 / 1,100 square feet = $1.25 per square foot.
Now take your units square footage and multiply it by the price per square foot that was previously determined.
1,500 square feet x $1.25 = $1,875
This method claims a reasonable rental price for your 1,500 square foot property is $1,875, based on a different property in the area.
4. Understand the Factors That Impact Rent Price
Location
The main factor that affects rent price is the location. Many people also consider the location to be the most important factor when choosing a rental unit. For example, a family will likely only consider a rental property that is near schools.
Students will likely consider units that are close to their university. Individuals may only consider units that are close to their place of employment. Having accessible public transportation near your rental property is also a determining factor of rent price.
Amenities
Tenants are willing to pay a higher rent price for certain conveniences. Tenants value amenities like access to an outdoor space, in-suite laundry, or an included parking space can significantly increase the monthly rent price.
Desirability
Certain features of your unit will also impact the monthly rent price. Prospective tenants will consider the size of the unit, specifically the amount of bedrooms and square footage. Tenants will consider the types of appliances used within the unit. Tenants will also consider the floor level the unit is located on if it is part of an apartment building.
Another important factor is the amount of storage that is provided in the unit. Storage space is very desirable, especially for families. Other factors that tenants consider and are willing to pay more for is air conditioning or wifi.
Rental Market
The amount in which you can charge for rent is very determinant on the current state of the economy. For example, if the economy is in a downturn, you may be able to increase your rental price, since people do not want to purchase homes, and are looking to rent instead.
Alternatively, if there is less demand for rental properties, you will have to decrease your rental price to attract tenants.
The type of lease you can offer will also have an impact on the type of tenant you will attract and the rent price you can set. Are you offering a short term or long term lease? Short term leases or vacation rentals can generally set a higher rent price than long term leases.
5. Partner With a Property Management Company
If you or your property is in the Middle TN area, consider working with a reputable Nashville property management company. This is the one of the most effective ways to set a competitive and accurate monthly rental price. When you hire a property management company, they will use their expertise to determine the best rental price for your unit.
Professional property management companies have the necessary knowledge to apply all of the factors listed above to set the best price for your rental. Property managers have inside knowledge of the rental market that the average landlord may not have.
Property management companies are able to determine the most accurate rental price by using their expertise to value your property and all of its amenities.
Hiring a property management company provides more benefits than simply setting a rental price. A property management company will provide service for all aspects of owning a rental property, such as tenant screening, rent collection, property repairs and maintenance, and rental property marketing.
Bottom Line
Partner with RENEW Real Estate Services! We are a Nashville property management company and we proudly serve Middle Tennessee and the surrounding area. Our property management experts can ensure your real estate investment is as successful as possible. Our goal is to maximize your profit and minimize your stress. Get in touch with us today to learn what we can do for you!
