There are many challenges that first-time landlords have to overcome when getting into the rental property market including proper tenant screening, the ins and outs of a lease, property maintenance, and learning how to properly deal with tenants – these challenges will come at different times and each will teach you valuable lessons. One of the first challenges you’ll be met with is trying to figure out how to set the rent price on your new rental property. Much has been written on the subject of valuing a property and applying it to the rent price, and different experts have different opinions. Thankfully, it doesn’t have to be so complicated. With the amount of research and analysis, you’ll be able to figure out how to properly set the rent price on a rental property.
The tried and true method
You’ve purchased a property and have probably spent a lot of time and money making it perfect for renters – after all this, it’d be nice to be able to pay off the mortgage and make a little money while you’re at it. Generally, most landlords tend to price their rent somewhere around .8% to 1.1% of the property’s value. If your home is worth $300,000, you could be charging between $2,400 and $3,300 per month. Depending on how many rooms there are in the house, you could split this between several tenants or rent to one group/family. While it helps to have a general idea of where you should price your rental property, there are other things that could help you settle on a better price.
Check out some comparables online and in-person
The first thing you’ll want to do is look at comparables in order to find out how other landlords in the area are pricing their rental property. Keep your search to properties that are similar to the one you’ll be renting – location should be comparable (if not in the same neighbourhood), the amount of bedrooms and bathrooms should be the same, and the square footage should be similar. Don’t be afraid to scope out and call on any “for rent” signs in your area to ask the property owner how much they’re charging, as it’ll give you an immediate idea of what you could price it at. While you’re at it, ask about the lease, deposit, utilities, and anything else that might be useful – it might allow you to identify an opportunity to command a higher price.
Online comparables, too, are essential for determining how to set a rent price. You’ll be able to pull up an extensive list of properties nearby, view details and photos, and see what landlords are charging for these properties. Take notes, especially when it comes to large price discrepancies – what are some landlords doing to command a higher price that others aren’t? This will help you decide on how to differentiate your property to be more attractive, and ultimately set a more competitive price.
What are you offering that other rental properties aren’t?
Your online and in-person research will give you a much better idea of what other landlords in your area are offering, and how they’re leveraging this in terms of rent price. In order to stand out from the crowd and command a fair price, you’ll need to look for opportunities. Your job is to analyze what’s being offered by other landlords, what isn’t being offered, and where opportunities might exist for you to take advantage. If other landlords are rolling utilities, cable, or internet into their rent price, it might be a good idea to follow suit so you can ask for a similar price.
You might also want to consider value-added services like home security systems, central air, snow plowing, lawn maintenance, and other perks which could fetch a higher price than other property owners who aren’t offering these services. If you have specific features in your property like an office space, multimedia room, on-suite bathrooms, or multiple kitchens, these things should be heavily considered when deciding on a rental price. Using these opportunities will not only make your property look more attractive to prospective renters, but will allow you to fairly set a higher price for rent.
Setting rent price on a rental property takes a lot of research and creative thinking, but it’s a necessary process that ensures you’ll receive a fair price for what you’re offering. Remember to start with a general idea based on your property value, seek out comparables online and in-person, and use these comparables to find opportunities for things that will allow you to command a higher rent price. With the right amount of research and dedication, you’ll become an expert on how to set a rent price on your rental property.
HighGate Properties is your one-stop shop for Toronto property management services. Our experienced team works with both residential and commercial landlords, handling things like tenant screening, maintenance, and day-to-day issues so that you can focus your time and energy on the important things in your life. To learn more about the Toronto property management and real estate services offered by the team at HighGate Properties, contact us today.