For any new property owner preparing to lease out their property has to decide, “How am I going to set my rent prices?” This decision will naturally have many variables involved, but knowing how to set rent prices is critical to your success as a landlord. Some of these variables will be more impactful than others. The factors that will determine your rent prices are location, amenities, square footage, and your mortgage.
How to Set Rent Prices: Location Matters
The phrase “Location, location, location” isn’t a cliché for no reason. Location is truly everything, at least when it comes to setting rent prices. Renting a property that resides in a highly desirable location can allow you to set your rent prices far higher than what would seem reasonable anywhere else. Any properties that are near resorts, attractions, within a historic district, or a metropolitan city would qualify to have higher rent prices.
Property owners can get away with these rent prices, because people value their time. If a tenant works in the city, the extra cost is worth it to them if they don’t have to endure a stressful daily commute. This tenant may also enjoy all the activities that the city has to offer, and that takes us to our next point.
Amenities are all the desirable aspects of a property that encourages tenants to not only stay but encourage others to stay as well. Amenities can include swimming pools, tennis courts, workout centers etc. Amenities that that the property owner provides are unfortunately a risk. The property owner has to pay to provide them and also upkeep them. To pay for them, that means the cost could be incurred in rent payments for tenants.
The best amenities are those that don’t cost the property owner anything. These include local attractions, attractive businesses, and great schools. Young adults and people building families are always looking to settle down somewhere that suits their needs. Why not offer your properties in the middle of an area that offers all of what they are looking for? These are the qualities that most people are willing to pay extra for, which in turn affects your rent prices. Unfortunately, sometimes a great location, and amenities isn’t enough to sell someone on a property. They just may be looking for something more.
Square Footage Matters
Those people looking to build their growing families aren’t looking for a studio apartment. They are looking for more square footage. Square footage matters, especially when it comes to setting rent prices. As the number of bedrooms and bathrooms increases typically so does the rent price. People who need more space understand this and are willing to pay extra for the space that they need.
Just like providing amenities, property owners had to foot the initial bill for these larger properties. This means that the initial investment was substantial, and naturally the property owners are looking for a return.
The Mortgage Has to Be Paid
Return on investment is the goal for any property owner. First that means to pay off their mortgage within a timely manner so they can begin to actually generate some profits.
This of course means those costs will be included into rent prices. After the properties are fully paid for, then property owners can generate profits from their rent payments. The decision to change rent prices after the properties are paid off will vary from owner to owner. If their tenants are accustomed to paying a particular rate, I see no use in changing the rent prices at all.
Knowing How to Set Rent Prices Includes All of These Things and More
The rent prices you should charge should be determined by your properties location, amenities, square footage, and your mortgage. Surly there are other factors to consider, but those four factor will be the most significant. Your goal as a property owner when setting your rent prices is to eventually begin to generate profit for yourself and other investors. Once your business has cleared that hurtle you have successfully conquered the real estate market.