If you’re thinking about renting out your property, it’s important to set a rent that will cover your costs, earn you a profit, minimize vacancies and provide value to your tenants.
The key factor in determining your home’s rental price is its assessed value. Ask at least 1.1 percent of your home’s value up to $100,000, 1.0 percent for the next $25,000, and less than 1.0 percent for the remainder. This factors in such variables as usage and wear, as well as the length of time that your property goes empty in between renters.
The value of the premium you charge for additional amenities or grounds is a judgment call that reflects both the added value you are providing to renters and the extra costs you bear as a resulting of maintaining, repairing and replacing the extra perks. If you rent your home fully furnished, you can ask a considerably higher rent, about double what you would ask for an empty property–and even more if you have high-quality furniture and expensive decorations. In the event your property has the opposite of amenities, such as dysfunctional plumbing or a shabby lawn, the same logic applies in reverse: Ask a lower rent to offset these unappealing features.
You have to adjust your rent to reflect the local rental economy. If rental properties in your neighborhood are going unoccupied, then it makes sense for you to adjust your rent downward so as to be more likely to attract a tenant. If rental housing is in short supply, you can ask for a higher rent. Generally, in a low-demand economy you may have to reduce your rent by one-third to one-half as compared to a high-demand economy.
The desirability of a location is tricky to estimate. One renter might place a premium on a location near bus lines, coffee houses and museums, while another might place a premium on a secluded, quiet property with no commerce nearby. You can spin your advertisement so as to appeal to people who will be more likely to place a premium on the location of your property. Some factors are unspinnable: If your property is next to railroad tracks or a sewage treatment plant, you will need to ask a lower rent in order to remain competitive.
You can expect to collect a premium for shorter rental durations. This reflects two purposes. First, it reflects the fact that your own costs are increased because of having to clean and prepare the property more often. Likewise, it reflects the cost of a greater frequency of vacancy. Second, it reflects the different nature of short-term versus long-term housing. People who are renting for the short term are usually doing so for some special occasion, in addition to their underlying need for living space. That makes the rental worth more, to the tune of 10 to 50 percent depending on the length of the rental, as compared to a long-term rental of six months or more.