How to Set the Best Rental Price for Your Property

Setting the best price for your rental is crucial to getting your home rented quickly. These tips will help you rent your home and get great tenants.

Setting the best price for your rental property is crucial to getting your property rented quickly and at a price that will net you the most income. Many landlords and rental property owners think that this means choosing the highest price their home could rent for. However, this can end up costing the landlord money. We’ve put together this list of tips to help you rent your home effectively.

Use Rentometer

Rentometer is a great free website that compares units in your area that have actually rented. That last part is key because many people refer to Zillow for neighborhood rentals, but that does not show their final renting price. A home might be listed on Zillow for $2500 and end up renting for $2000.

Rentometer will show you how reasonable your asking price is for your area. It will also tell you the median rent, the 25th percentile rent, and 75th percentile rent. If you sign up for a pro account with them, you’ll get additional features that give you more statistics to go off of.

Take Your Home's Features into Account

Landlords typically want to raise their rent price if the home has upgraded appliances and finishes, a pool, etc. It’s okay to factor those items into your rent, but keep in mind how much you are increasing it. Tacking on $200 to your asking price for a pool will not help your home rent.

Pay attention to what other units have in the area. If you live in a nicer region, things like stainless steel appliances are expected, not a bonus. Additionally, over-upgrading your home may not help your home rent if you live in a more standard area. Homes there are likely cheaper to begin with and your home will feel out of place and overpriced.

Max Rent Pricing

Good Life implements a strategy we call Max Rent Pricing. This strategy is designed to get you the best tenants and maximize your profitability. We recommend pricing your home just below the market rent (around 5%). We do this because we have found that this attracts the best quality tenant and rents your home the fastest.

Many landlords are set on the highest asking price because they want to net the most income from their property. However, selecting a price that is too high will cause your home to sit on the market longer. Vacancies are where owners can lose a lot of money because they have no rental income, but they still have to keep the home in good condition.

Landlords also think that higher prices equal better tenants, because they can afford the rent. However, this is not usually true. Many people with lower credit scores are willing to pay a higher price up front to get into a home. Qualified tenants know they will be accepted anywhere, so they are looking for a good deal.

Property Management Benefits

When you use a property management company to manage your home, you gain access to additional features to help your home rent. One of these is their own property management software. Platforms such as Appfolio will show you comparable homes that have rented in the area.

Licensed property managers can also utilize the MLS. The MLS is more often used for home sales, but also for rentals that are considered luxury or struggling to rent. The data can be a bit skewed since they are typically properties over $3,000/month or properties that have struggled to rent quickly.

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This is Bryce with Good Life Property Management. I’m going to go over setting the market rent for your property. So this is obviously a very crucial step in the make ready process. And it’s a bit of an art, but it also can be boiled down to a science. So property management companies in particular have a lot of tools at their disposal. So that’s, if any step of the make ready process should involve a manager, I highly recommend it’s setting the market rent. Landlords, in my experience, that are the owners of the home that set the market rent themselves, generally set it far too high and don’t take into account a few crucial considerations. So I’m going to go over some of the data that I actually use and give you a couple of resources to use as well as the individual landlord. So any good management company is going to have a management software that’s able to pull from comparable properties pretty easily to give a high level overview of similar rentals in the area. So for us here at Good Life, it’s at Folio. And this platform has what’s called a rent match comparison. And basically it pulls from similar properties in the zip code that have actually rented, which is a crucial component when looking at comparative data. A lot of people look on something like Zillow or the MLS and look at properties that are actively being marketed. When this is a big mistake because we don’t know what these properties are actually going to end up renting for. They could sit there for 30 days, 60 days before they were rented at that rental rate. So you want to find a sweet spot in between maximizing the rental income and minimizing the vacancy. So our software is very powerful in this regard. So as an example, I’m using our office address here in Claremont 92117. As a two bed, two bath, 800 square feet, kind of a bread and butter, kind of rental properties. So I’ve put the advertised rent around $2,000. You can see the data is pointing to a median rental rate of around 1950 for two bed, two baths in Claremont. So our data here doesn’t, we don’t know exactly where they’re located. The finishes of them, some of the amenities, like they have a HWA with a pool, the detached home, stuff like that. So it’s limited in that regard, but it gives us a really solid set of data to jump off from. Because it’s data that’s actually from rented properties. So really good place for us to start now. The property was more of a luxury property. It also turned to the MLS. This is San Diego’s multiple listing service here. And what I’ve done is I’ve pulled a license agent, can do this any license agent, even if there are sales agent, pull up residential rental properties and look at what has rented on the MLS. Now you need to be careful with the MLS because a lot of properties go there when they’re having a hard time renting rather than just right off the bat, especially if it’s something like a kind of standard rental, like a two bed, two bath in Claremont. So the MLS is a lot more powerful for niche or luxury properties, especially downtown is when it’s most useful. As there’s a ton of comparable data in most every unit that’s going on the rental market in downtown 92101 is going to be on the MLS. So it’s a lot more data and a lot more reliable. So here in Claremont, I wouldn’t use much of this data unless it was a model match or in the same community. Like if we had a community in this Balboa Arms community right down the road from our office, I would definitely be looking at these data. I would bring them up, look at the photos, look at some of the information that this new agent provided to make my recommendation based on those. Now something that you can use as a landlord is rentometer. It’s a free software online. It doesn’t even require a sign up. You just enter your properties address, the market rent you want, and the number of beds. Hit analyze, and it’s going to bring up data. Similar, really solid and reliable data because it’s properties that have actually rented in a very tight radius, usually within a mile. And as you can see, it’s a drawbacks with our app folio average around 1950. And you can kind of see a percentile. So this is really useful. You don’t need to be a licensed agent to use this. So highly recommend that platform. Something else to consider is the seasonality, especially if you’re in a student market, such as UTC or near SDSU. You really need to consider what time of year the property is becoming vacant. Unfortunately, if you’re near UCSD or SDSU and it’s the dead of winter, you’re going to have to concede quite a bit up to 15 to 25% in your market rent to find 12 to 10. However, if it’s spring or summer, regardless of where you’re at, you can really maximize your rental income and go for a top of market and adjust accordingly. So huge factor, even in San Diego, the rental market is always strong. However, it is at the mercy of the season. So in the winter and fall, you need to concede at the very least 5% and probably north of that, depending on marketing activity. One last thing that you need to be wary of, but you can use as a resource is our active on public platforms like Zillow. It’s a good place to look at what kind of gauge, get a temperature of the market and see how long properties are sitting. If you have a bunch of properties at a similar price point that have been on the market two, three, four weeks, that’s an indication that there’s a ton of supply and a lack of renters. And you’re going to have to price your property aggressively to get it rented out. Now if properties are at what you have in mind for top of market and they’ve only been marked on market a few days, that’s a good indication the market is really strong in the zip code for similar properties. Just be sure when you’re filtering that you, you know, if it’s a two bath, you have two baths on. Or if it’s a condo, make sure you take off houses. Just so that you’re comparing apples to apples, it’s brutal to take a comp into consideration when it’s a completely different type of property. So I hope this video helps you guys out. For more, you can check out our free guide renting your property, preparing your property for rent. And the rest of our video series, thank you.