Whether you are renting one or more properties, the right pricing of your rental property is one of the most important factors of the profitability of your investment. But how to estimate your rental price correctly?
Of course, the rent shall be covering all the expenses including loan payments and maintenance cost. In addition, at the end of each year you want to end up with positive cash flow that will cover your time and generate profit on your investment. In any case, you should not under-price your property as if you do so you will lose out on revenue. On the other hand, if your rental price is too expensive, your property may be unoccupied even for months.
Fortunately, there are several steps that you can take in order to decide how to appropriately price your rental. Here are the most common ways of figuring out the right price.
1. Check Similar Listings
It is always a good idea to check out local listings. Visit property listing websites and look for comparable properties at the same area. Check for houses with similar age, same number of rooms and similar square footage. Furthermore, if it’s possible check for how long are these properties listed on the websites in order to identify if they are priced properly.
2. Consider the Location
Location is one of the most important factors of the real estate sector. The property’s proximity to the city centre, shopping centres, entertainment, and traffic can have important effect on the rental price. In addition, many renters want to be close to their school or work. You, also have to consider the crime rate of the area of your property as it can be a factor with significantly negative effect on the rent you can charge while a house in a prime location makes some tenants to be willing to pay more.
3. Adjust based on your amenities
When tenants are looking for a new house, there are some features that top their list. Having a rental property that contains these desirable features can help to differentiate your rental from the competition. Therefore, don’t set a standard price for all properties with the same size in the same location, but adjust your asking price according to the amenities you provide. Some amenities that can affect the price of rental are the following:
- View – Properties with sea view or with panoramic city view are usually more desirable than those without.
- Renovation – Renovations are effective at getting units rented quickly and at a higher price.
- Floor level – Higher floor apartments are more desirable and therefore can obtain a higher rental price.
- Large Windows – Large windows let as much natural light as possible and therefore, will make the property look warmer and more inviting.
- An Extra Balcony or Yard Access – Having outdoor space will allow you to charge higher rent.
4. The pet allowance factor
Nowadays, the majority of the renters own a pet while a significant number of landlords do not allow pets in their properties. This leads to a lack of supply of apartments for pet owners and therefore gives the opportunity to landlords that allow pets in their apartment, to rent their properties quickly and of course to adjust the rental price accordingly.
5. Test your price
Even if you have already listed your property, there are some red flags that can help you to identify if your property is over-priced or under-priced. For example, if there are no inquiries by the third day after listing it, or you get inquiries but no one shows up to see the property, it seems that your property is overpriced. On the other hand, if you receive a lot of inquiries within the first day of listing it, or you receive pressure to take a holding deposit, your property is probably under-priced. In any case, you can use this feedback to correct your price and to maximise the profitability of your investment.
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