If you’re a landlord, you understand the challenge of setting the rent price for your rental property.
Sure, you want to cover all your expenses, from the property’s mortgage to repairs. And you want to end up with a positive cash flow, money to cover your time and generate profit on your investment.
But the problem remains: if you price rent too low, you lose out on revenue. If you price rent too high, your rental may sit vacant for weeks or months.
You’re trying to calculate the “Goldilocks” price.
You might feel tempted to maximize your cash flow by boosting the rent price, but that strategy can backfire. A sky-high rent amount could alienate prospective tenants—especially if it doesn’t fit the neighborhood or the property—which can lead to vacancies.
If your property sits empty for even a month, your profits will dwindle. Vacancy is the number one reason landlords lose money on rentals, so make sure your rental is priced competitively.
Inaccurate Pricing Red Flags
Your rental might be priced too high if:
- There are no inquiries by the third day after listing it.
- You get inquiries but no one shows up to see the property.
- The people who come to showings never fill out an application.
Your rental might be priced too low if:
- You receive multiple inquiries within the first day of listing it.
- You receive lots of pressure to take a holding deposit.
Factors that Affect Pricing
- Multifamily vs. single family
- Number of bedrooms
- Number of bathrooms
- Square footage
- Location and proximity
- Lease length
- Inflation rates
- HUD fair market rent
- Amenities and fixtures
- Lease clauses
- Lawn and fence
Do your research. It’s that simple. If you want the easy shortcut, buy a Cozy Rent Estimate. It’s what I use, because the report incorporates a high percentage of “actual” rent prices when calculating the rent amount, not just the listing prices.
Most sites use “listings data,” which tells you what other landlords want to get for their properties, not what rent they are getting for their properties. Even though listing prices still have value, there’s a big difference between actual rent prices.
Here are our favorite sites for researching listings prices:
Browse similar rental listings, and see what they’re charging. The only real negative is that some ads are fake. They’re used by landlords who are testing the waters by pricing a unit way above the expected rent price.
- Zillow Rent Zestimate
You can see local listing prices, and Zillow will even estimate how much you can get in rent. But again, it’s based on listings data, and many landlords think it estimates too high.
- Trulia Market Overviews
Trulia has a nice map feature that lets you zoom into your area and see how rent listings vary by area.
Professionals and real estate agents can post to the multiple listings service (MLS). As such, they show up on Realtor.com, and it’s a great way to see how the pros are pricing their rentals. With that said, it doesn’t mean they are right. There are other factors that play into how the pros price the rentals of others, like commission, workload, time constraints, and availability to show it.
An oldie-but-goodie, Rentometer is one of the first tools on the market to attempt to provide a rental estimate. It does a great job of estimating single family homes.
Ask a Professional
- Fellow Landlords
Talk to other landlords in your area, with places similar to yours (same number of bedrooms, bathrooms, square footage, and similar conditions). Just be careful of the “Old Pro” landlord who hasn’t raised his rent in 20 years.
- Ask a Real Estate Agent
Before asking an agent, make sure their brokerage has experience with rentals. If they only perform sales, then they won’t know much about the rental market.
Rental housing associations, landlord clubs, and real estate investment clubs are fantastic places to meet landlords, find mentors, and other industry professionals. It never hurts to grow your network.
Compare Actual Rent Data
When a real estate agent “pulls comps” to evaluate a home for sale, they use actual sales, not listings prices. Actual rent prices will inform you of what landlords in your neighbor are actually receiving in rent, not just what they hope to receive.
This data takes time to research, so we’ve made it simple for you to access local data in an easy-to-read report.
Introducing Cozy Rent Estimates
A Cozy Rent Estimate will help you calculate your rent price with total confidence.
It’s business intelligence for landlords.
For $19.99, a Rent Estimate does the work for you. In minutes, you’ll get a recommended rent estimate for your rental property based on comparable rentals in the area, along with a confidence score for that estimate. Consider it your rent calculator.
With a Rent Estimate report, you’ll know exactly how much you can charge for rent.
After getting their calculated Rent Estimate, some Cozy landlords discovered their rent amounts were under market rate by several hundred dollars, so they adjusted rents accordingly. Even landlords who found they’re charging the right rent amount learned about their rental markets with a Rent Estimate report.
Because we believe landlords should make decisions based on reliable data, each Rent Estimate report includes more than just an estimated rent price.
Your report includes valuable info, including:
|A rent estimate for your rental|
|Accurate rent amounts of comparable rentals in the area|
|Local vacancy rates|
|Recent and historical county rent trends|
|Other vital investor metrics|
Whether you’re a landlord, property manager, or potential home buyer, this info will help you make informed decisions about pricing and marketing your rental or evaluating future investment properties.
My Own Estimate
I ran a Cozy Rent Estimate on my properties and compared them to the estimates of the leading competitors. Then, I compared all the results to the actual rent amount that I am receiving from each unit (which I know is market rate since I try to push the envelope on price every year).
As you can see, Cozy’s estimate came the closest to actual market rate, 4 out of 5 times.