So you can’t sell your old home, and decided to rent it out instead. As you will soon discover, setting a fair rental price is one of the trickiest aspects of managing your own property. On the one hand, you’d like to get the highest rent possible but don’t want to price yourself out of the market. How do property managers set their prices? These tips will show you how.
Read the classifieds
The classifieds and on-line rental companies are where property managers begin their search for comparable rental properties. They search for comparable properties loosely based on the following criteria:
- Is it in the same part of town?
- Does it have the same number or bedrooms and bathrooms?
- Does it offer similar features such as a garage, fenced yard, office or family room?
- Is it approximately the same age and style?
Once the property manager has assembled a list of potential comparisons, the next step is calling the number of the listing for more information.
It’s on the phone where a property manager can find out what services are included in the monthly lease. Questions should include such things as:
- what utilities are included in the rent?
- who pays for the yard service?
- and what kind of perks come with this rental? Perks might include a membership to a neighborhood clubhouse and pool, or a washer and dryer.
If the property seems relatively similar, then asking for the address is the third step.
The drive by
In Realtor-speak, a “drive by” is physically driving by a house for a better look. It’s by visually inspecting a property that a manager can decide exactly how comparable this property is to the one she is leasing. Things that affect the rent include:
- curb appeal and the general appearance of the block.
- condition of the property.
- proximity to noise and unwelcome commercial intrusions.
- access to schools and parks.
Setting the price
Once a property manager has done her research, the final step is to determine a fair market rent for the rental home. The simplest method is to select the three most comparable houses, and make slight monetary adjustments for differences. The rent is adjusted upward if her rental clearly outshines the others in terms of overall condition, and perks provided within the lease such as yard care or utilities. The rent is adjusted downward if the property doesn’t have quite so much to offer.
There really isn’t any magic formula for determining the best rent that you can ask for a property, but it does take a little more effort than asking your cousin’s wife’s best friend in the property management business for her opinion. By checking the ads and scouting out comparable homes on your own, you’ll discover how easy it is to determine a far market rent that measures up favorably to the competition.