Rental Price Question

[accolay]

I have a house I've been working on and may rent out by the end of the year. Rental rates are sky high in my area.

That being said I think that, well, it's kinda disgusting to charge as much as I could. I think the rental rates are obscene right now.

Should I be thinking about it this another way? Should I just get what the market will bear money during these good times since there will always be lean times someday? Despite the market rate, do landlords plan build future downturns into rental rates? How do rental markets handle downturns if rent becomes unaffordable? Or does it?

[Michael in ABQ]

One strategy is to charge a below-market rate in order to retain a good quality tenant which will cut down on turnover costs. However, if you get a typical or below-average tenant who trashes your place or requires eviction you may kick yourself for not charging market rent to help defray those costs.

[Papa bear]

Charge market or close to market rate. You will probably end up with people trying to offer you more $$ to secure the property if it’s really as hot as you say it is.

Then don’t feel bad about it. They are adults in a consensual, non forced transaction willing to give you hard earned dollars to live in a property that is updated, well maintained, and with a great landlord. Right?


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[monarda]

Charge market or close to market rate. You will probably end up with people trying to offer you more $$ to secure the property if it’s really as hot as you say it is.

We charge just a little under market rate, and require snow shoveling and lawn mowing. Our tenants tend to stay a long time.

We've never had someone offer us more $$. But we only need 2 hours of showings to fill a vacancy (and we often get multiple qualified applicants).

Our property is in a trendy neighborhood. Rents have doubled in the last 15 years since we've owned this place.

[cchrissyy]

If you don't charge close to market rate in a hot market, you'll be overwhelmed with applications and cause yourself a lot more work to get it rented. Also, you may scare off a few desirable tenants, who think you might be a scammer or there must be something else really wrong with the place.

It sounds like maybe you don't really want to be a landlord. How about selling it to somebody who values that stream of income more than you do?

[Rubic]

Rather than give your tenants a price break on the front end, give
them a break on the back end, i.e. when the lease renewal comes
up.  If they're great tenants, you can keep the rent the same or offer a
more modest rent increase than the market would otherwise dictate.

[accolay]

It sounds like maybe you don't really want to be a landlord. How about selling it to somebody who values that stream of income more than you do?

I will still get a hefty stream of income off this propery charging well below market rate. That's why I think the market rate is insane.

[Jon Bon]

It sounds like maybe you don't really want to be a landlord. How about selling it to somebody who values that stream of income more than you do?

I will still get a hefty stream of income off this propery charging well below market rate. That's why I think the market rate is insane.

Why don't you just charge market rate and then give them a check every month for the difference? Sounds crazy right? but that is basically what charging well below market rate would get you. You are giving money to your potential tenants.

I think you are wrong in doing this but, have you looked into affordable housing programs? I bet there is some government cheese available for something like that? Might be worth investigating.

I say let capitalism do its thing.

[wageslave23]

If rents have gone up, then I'm guessing home values have gone up too.  So recalculate the return you are getting by including the money you would be able to pull out of it if you sold the house.  If prices have doubled since you bought it and you have $100k+ in cash that you could pull out if you sold it, then this is how much you have invested in the rental house.  It makes the difference between your rental income and your expenses not seem as great when looking at ROI %.