Every landlord wants to charge a premium for rent. However, there is a fine line between wanting top dollar for rent and getting it. In this article, learn how to price your rental so you lower vacancy and get top dollar.
Several years ago — when I was just getting started — I charged the highest rent in all my areas. I did this because I had premium properties. Because I charged premium rent, I tended to attract high-quality renters.
However, I now use a more modest approach to price my rentals.
You might be wondering what made me change my direction from focusing on charging premium rent.
It’s because my properties would stay vacant up to a month while I screened tenants, and as any experienced landlord knows, vacancy is the “profit killer”.
You risk not having your unit rented if you don’t know how to price your rental and if ask for too much rent.
What I Do
Now I conduct some basic comparable research to figure out what the median and average rent is for my area. From my experience, landlords don’t spend nearly enough time doing research for average rent in areas where they have rental property.
Instead, they might ask one or two people and basically guess. This method could cost you several thousands of dollars every year in lost rent.
Instead, I compare rent prices via five different sources, and price mine a little higher than the average.
Multifamily vs. Single-family Homes
One factor to consider is the difference in multifamily versus single-family homes.
On paper, multifamily houses look like better potential investments. However, multifamily properties generally do not receive the same rent as single-family houses do.
In my situation, I receive about $900 in rent for a 2-bedroom, single-family house I own. However, I receive only around $650 in rent for my 2-bedroom unit that is a part of a triplex. Although the triplex is in a high demand area, because it’s a triplex, it doesn’t receive the same rent rate as a single-family house.
Comparable Factors to Look For
When you are trying to determine how much rent to charge, consider the following:
- Single-family house or Multifamily
- Pets Allowed
- Square Footage
5 Websites to Conduct Rent Research
1. Cozy Rent Estimate
You could try to do this research manually, or rely on a real estate agent, but Cozy’s Rental Analysis does the work for you. Within seconds, you’ll have a recommended rent amount based on comparable rentals in the area, along with a confidence score for that estimate.
When conducting research, I also check Rentometer. This site is super easy to use and provides a lot of actionable data. I really like how it gives users both the average rent and the median rent. It’s very easy for larger properties to skew an average rent for a given area.
If you have an area, for example, where 3-bedroom houses usually rent for approximately $1,300, but you have a couple of larger nicer houses in this group that rent for $2,200, these larger houses are making a significant contribution to the average on the high side.
When you are doing research, you could easily overestimate your rent if you include these larger houses when you calculate average rent. This is why I prefer calculating the median rent as well.
I use Craigslist to check what fellow landlords are asking for rent. But I don’t use only this information as some landlords might be testing the market at a higher rate and will not get it rented for that rate. I also use Craigslist to see how much people charge for a roommate. I find this to be interesting data since the majority of my renters have roommates.
Zillow is a site I use for rental comp research because I can easily see the location of the properties on the left side of the screen, and I can see the quality of the property on the right side.
I use Realtor.com for rent research for higher-end properties. I prefer their mobile app and highly recommend it to anyone who prefers to do research on their phone.
After you download the app, you’ll see a screening tool you can use. I really like how the properties are mapped out, and when you click on a property, a picture of the property pops up with some data but doesn’t overtake the entire screen.
Other Sources for Rental Research
1. Fellow Landlords
Local property managers can give you a lot of data on what is renting and where. I don’t bother them on the phone but simply use their websites to see their inventory. I take note when I see a high-quality property that’s not renting fast. I also talk with some fellow landlords I know and ask what kind of rents they are receiving and how fast they are renting out their properties at that rate.
I have never rented to a tenant with a Section 8 Voucher, but every year I check the Section 8 rates for my area. Why would I do this?
In my opinion, this gives you a great baseline of what you should be charging
I hope this article gave you some insight on how to use comp research to find an appropriate rent rate for your rental property. If you think I left something out or have a follow-up question, let me know in the comments!