How Much Should You Charge For Rent?

The only thing that keeps landlords awake at night is the thought of losing a tenant and being unable to sign a new one for months (thereby financing the cost of their home and rental out of pocket). Okay, maybe that is an exaggeration, there are far bigger things to worry about.

But if you lease properties, it should be a concern for you. A big fear for many landlords is having to go months without a tenant and being forced to float the costs for the rental unit.

One of the best ways to attract (and scare away) potential residents is the price you charge, in many ways, it is probably the single biggest issue that pushes away or draws potential resident to your property.

If you’re a property owner, it is critical that you understand how to price your rental to attract the residents while ensuring you’re charging enough to cover your costs.

There are three primary factors to consider in pricing your rental: the location, economic vibrancy of the community, and the reputation of the school district.

1.   Location, Location, Location

Location is one of the most important factors to consider in pricing your rental. Is rental located near public transportation (is public transportation reliable)? Is it “walkable?” Are their restaurants, community amenities (like parks, libraries, etc.) nearby? How about a gym? Is the community developed or in transition? Is it near the beach, the airport, or major freeways?

The more convenient your apartment’s location, the more rent you can charge. The nicer the community, the safer it is, the accessibility of travel options all improve the value of your property. Also, consider the economic opportunities in the neighborhood, will it be easy to find work (or customers)?

Finally, does your apartment have a view? Of what? Often, units that are facing attractive scenes (like downtown, the beach, or the park) are more expensive than those that simply face another building.

The location of your apartment touches on many factors. In short, the more attractive the location, the more you can charge for rent. That means, even if you have the nicest house or apartment in the block, you still can’t exceed the average market price for that zip code because of the location matters (often more so than the amenities in the apartment).

2. The Community

What is the community like? Is it safe? What are typical crimes committed there? Is there a police presence? Similar to location, what other things can your tenant explore in the community? Can they get a job near their apartment? Can they open a business with a lot of foot traffic?

Take into account if the community is developed or in transition. In transition neighborhoods often have a penalty because, while the neighborhood will be attractive soon, there are many other factors impacting current value (such as high crime, insufficient city services, or poorly maintained roads).

How many businesses in the area (are there a lot of support services)? Is there a high turnover rate (e.g., are there a lot of vacant storefronts)? Economic stability determines if a neighborhood will continue improving or if it will slide. Economic vibrancy (like location) results in a lot of factors to consider that could increase or decrease the value of your property.

3. The School District

Finally, what is the reputation of the schools in your neighborhood? Families (with children) are great tenants because they are more stable and less likely to leave. But you can only get these tenants if your property is located in a district with a good school (or schools). Many families will uproot their entire lives to ensure that their children attend a good school – so owning one of these properties is a good way to tap into this market.

While you can find out many of this information simply by surveying a neighborhood and reading about it – let's face it – you will never know a community until you live there. Luckily, property management companies regularly engage in this type of data collection and can advise you on your particular neighborhood’s characteristics. Moreover, once you know the factors, you can include those considerations in your pitch to applicants when you tell them the price.