Author Topic: How do you set your monthly rental price?  (Read 6359 times)

Franklin

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How do you set your monthly rental price?
« on: August 15, 2014, 12:38:54 PM »
Not a RE investor, but I've always wondered what the formula was for setting the monthly rental price on a property.  Is it primarily based on comps, square footage, desired return rate, all of the above and then some? Can someone walk me through the decision tree? 
« Last Edit: August 15, 2014, 01:56:28 PM by Franklin »

thebeachbum

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Re: How do you set your monthly rental price?
« Reply #1 on: August 15, 2014, 02:22:50 PM »
It is mostly done by sqft, for example in my area the average rent $/sqft is $0.75 so for my 2020 sqft rental I should charge around $1515/month. By talking with local realtors, agents, craigslist, and property managers you should easily be able to find out what is average in your area. What ever the number is is obviously a ballpark, and can be adjusted both up and down for other factors such as schools, upgrades (granite, fixtures etc), number of bedrooms, covered patios, and so forth, but it will give you a good starting point. I generally list mine below market value so that I have lower turnover.

Hope this helps

oldladystache

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Re: How do you set your monthly rental price?
« Reply #2 on: August 15, 2014, 03:20:29 PM »
I don't have rentals anymore, but when I did I'd get the local paper and get a list of nearby houses for rent that seemed comparable and drive around and look at them from outside. After looking at 4 or 5 it was obvious what I should ask.

sammybiker

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Re: How do you set your monthly rental price?
« Reply #3 on: August 15, 2014, 05:34:12 PM »
Comps!

Another Reader

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Re: How do you set your monthly rental price?
« Reply #4 on: August 15, 2014, 05:42:48 PM »
What you can charge foe a rental is a function of a lot of variables of the property and of the renting population.  It all boils down to one thing.  What rents have similar properties in your neighborhood or nearby neighborhoods that are very similar to yours achieved in the last 30 to 60 days?  Those comparable properties set the market for your property.

yddeyma

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Re: How do you set your monthly rental price?
« Reply #5 on: August 16, 2014, 06:18:37 AM »
I use comps by what others are asking (zillow.com helps with this, as does craigslist and the local newspaper).  But I also pull up the local Section 8 limits to see what they consider the going rate.

SwordGuy

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Re: How do you set your monthly rental price?
« Reply #6 on: August 16, 2014, 07:16:18 AM »

yddeyma

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Re: How do you set your monthly rental price?
« Reply #7 on: August 16, 2014, 03:09:43 PM »
Section 8 is the housing voucher program.  The term "Section 8" refers to the chapter (or paragraph, or whatever) of code that defined/funded the program.  Its subsidized housing, essentially.  Each state implements their own program, but its federally funded. So its hard to give specifics on here (unless you live in GA like me).  Here's some general info though: http://portal.hud.gov/hudportal/HUD?src=/topics/housing_choice_voucher_program_section_8

MayDay

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Re: How do you set your monthly rental price?
« Reply #8 on: August 16, 2014, 07:52:56 PM »
In my town it is almost entirely a function of bedrooms. 2= 800-100. 3= 1100-1300. 4= 1400-1700.

Condition doesn't seem to matter, the junky houses might sit empty a month or two, but there aren't many rentals in town so eventually someone desperate will rent it.

monarda

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Re: How do you set your monthly rental price?
« Reply #9 on: August 16, 2014, 08:25:44 PM »
Mostly comps and partly trial and error.  We had a realtor walk through and advise us on rental price a couple of years ago. She suggested $1000-1100 for our 2BR unit at that time. She also suggested that if we show the place and can have it rented pretty much immediately, then we are undercharging.  We rented it then pretty easily for $1000.  Those tenants stayed for 2 years.  Ok, so we raised it.  We just advertised it and filled it immediately for $1100, we had 9 applicants from a single day of showing.  We are probably still undercharging some.  But we don't want to be priced at the top of the market. A little under market rate makes tenants want to stay, and that has value.

Fishingmn

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Re: How do you set your monthly rental price?
« Reply #10 on: August 16, 2014, 08:30:04 PM »
I look for comps on the following -

www.hotpads.com
www.padmapper.com
craigslist

Nords

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Re: How do you set your monthly rental price?
« Reply #11 on: August 16, 2014, 10:30:13 PM »
Not a RE investor, but I've always wondered what the formula was for setting the monthly rental price on a property.  Is it primarily based on comps, square footage, desired return rate, all of the above and then some? Can someone walk me through the decision tree?
Comps.

We've been renting out a property for most of the last 20 years.  We know the neighborhood, we know which homes are rentals, and we know which addresses have our home's floor plan.  We even have the names & phone numbers of some of the other landlords.

Craigslist, AHRN.com, and even Zillow can give you the big-picture data.  Once you get to know a neighborhood then you can drill down for more detail.

arebelspy

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Re: How do you set your monthly rental price?
« Reply #12 on: August 17, 2014, 10:32:32 AM »
Agree with everyone else on the comps, and want to add one more resource not yet mentioned - www.rentometer.com
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Daleth

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Re: How do you set your monthly rental price?
« Reply #13 on: August 17, 2014, 11:07:34 AM »
Not a RE investor, but I've always wondered what the formula was for setting the monthly rental price on a property.  Is it primarily based on comps, square footage, desired return rate, all of the above and then some? Can someone walk me through the decision tree?

I don't pay much if any attention to square footage. I just look for comparable rentals on Craigslist, notice what the price range per bedroom seems to be in the neighborhood of the rental, and then set the rental based on how my place compares to the others (for instance if most of the places in the area are going for $400-$600 per bedroom, whether mine is closer to $400 or closer to $600 depends on how it compares to the competition: do I have nicer appliances, extra amenities (e.g. a garage), hardwood floors, yada yada?

Then I put it up on Craigslist at the higher end of what I  think it could get and see who bites. If I don't get more than 1 or 2 inquiries in the first week or 10 days I figure I priced it too high, so I lower it.

Nords

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Re: How do you set your monthly rental price?
« Reply #14 on: August 17, 2014, 03:21:58 PM »
Agree with everyone else on the comps, and want to add one more resource not yet mentioned - www.rentometer.com
Nice-- I like the way it shows the location of other neighborhood rentals, including a few that we weren't aware of.

thedayisbrave

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Re: How do you set your monthly rental price?
« Reply #15 on: August 17, 2014, 07:23:34 PM »
Agree with everyone else on the comps, and want to add one more resource not yet mentioned - www.rentometer.com
Never seen that but plugged mine in and said what I charge is 'reasonable'.  Awesome resource, thanks!

arebelspy

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Re: How do you set your monthly rental price?
« Reply #16 on: August 17, 2014, 07:30:43 PM »
No problem.  Sources like that are never an end-all, be-all, but multiple ways to check and compare is always good.  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Rural

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Re: How do you set your monthly rental price?
« Reply #17 on: August 17, 2014, 07:50:06 PM »
Agree with everyone else on the comps, and want to add one more resource not yet mentioned - www.rentometer.com
Never seen that but plugged mine in and said what I charge is 'reasonable'.  Awesome resource, thanks!


I like it, too, because it's the only such website ever posted here that knows my area exists! Well, except the walkability score site that put a Chinese restaurant into an abandoned house trailer... :-)

Daleth

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Re: How do you set your monthly rental price?
« Reply #18 on: June 29, 2016, 09:37:23 AM »
Comps!

Ditto. I just look on Craigslist to see what apartments are going for in the area, and make some mental adjustments based on the ways the comps are different. I don't look at square footage unless there is a dramatic difference, which I usually can't see from the ad, so I usually don't look at it. Instead I price "per bedroom." Like, in this neighborhood I might get $400/month per bedroom, while in XYZ other neighborhood I might be able to ask $550/BR/mo.

clarkfan1979

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Re: How do you set your monthly rental price?
« Reply #19 on: June 29, 2016, 12:56:00 PM »
Comps on craigslist. I feel most comfortable being right in the middle. My wife's boss has a high end rental and she continually breaks neighborhood records with her asking price. She tries to make her house the best on the block so she can ask for the most money on the block.

Blindsquirrel

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Re: How do you set your monthly rental price?
« Reply #20 on: July 02, 2016, 07:31:07 AM »
   Another vote for CL, if I am unsure on how quickly/how much a house or area  I am thinking of will rent for I run a test advertisement using my google number. If I get a bunch of calls, I know that the place will rent fast and may bump the asking price up a bit. If I hear crickets or get lousy applicants, I know my advertised price is too high.

NoNonsenseLandlord

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Re: How do you set your monthly rental price?
« Reply #21 on: July 12, 2016, 09:21:53 PM »
I pick a price based on comps.  I am generally renting a few places every year, so I have a good feel anyway.

If I advertise and get minimal responses, I lower price in a week or so.  If I have 2-3 qualified people, and they do not rent, I know I am not the best value, and I lower price.

Pricing too high, gets lower quality renters.  Great renters can rent anywhere, they do not need to spend an extra $25 above market for your place.

Vacancy expense is your #1 avoidable expense as a landlord.  Avoid it at all costs.

DeanW5

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Re: How do you set your monthly rental price?
« Reply #22 on: September 23, 2016, 02:32:12 AM »
You should take into consideration that not all units are the same. So it won't be a good strategy to search prices for 1 br apartment in your area and put the same price for your property, unless the units are exactly the same. So, rent price should based on:
 -Views. What will renter see when he looks looks out of the window? Is it a beautiful garden or the parking lot?
- Square Footage (as was already mentioned) should be also considered.
- Updates . Does your property have updated appliances?
- Floor level. Usually higher floor are in  great demand. Surely, if your unit has a lift. 
 I hope this tips will help you to set right price for our rental

Enigma

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Re: How do you set your monthly rental price?
« Reply #23 on: October 04, 2016, 06:33:16 AM »
I base my rent on others in the area regardless how much I purchased a unit for.

clarkfan1979

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Re: How do you set your monthly rental price?
« Reply #24 on: October 05, 2016, 02:04:07 AM »
When applicants submit their application, I ask them to list their previous 3 residences and the rent that they paid. The data is always one year old because I use the applications from one year to set the rent the following year. However, it works pretty well for me in combination with craigslist, rent-o-meter and some local websites.

srob

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Re: How do you set your monthly rental price?
« Reply #25 on: October 05, 2016, 03:18:57 PM »
Comps for me. I have been surprised a couple of times by mob-like open houses and people offering to pay significantly more rent than I am asking to secure a spot. Then I know that I am behind the curve on market rent.

I have thought about testing the market by advertising rent high enough to keep the apartment from filling and then ratcheting it down from there until it fills, but it sounds like too much work.

marty998

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Re: How do you set your monthly rental price?
« Reply #26 on: October 06, 2016, 01:13:48 AM »
Market rate per week less $5-$10.

Whenever the Property Manager raises rates we always set it just under market. Chances are the tenant is googling the same data. If they see the proposed rent is slightly under market they know it is unlikely they will get a better deal elsewhere.