Real estate investments are often considered promising due to the relative stability of property markets and the passive income rental properties provide! Even though bubbles may occur in property markets from time to time, these markets are not as volatile as others, such as stock markets.
You may have done a little research on investing in real estate and perhaps you’re considering renting out your property. One question that new landlords have to answer when renting is how much to charge for rent. Finding out how much rent to charge plays a vital role in keeping your rental property occupied and generating interest in the event a tenant moves out! It also makes sure you're receiving appropriate rental income.
So how do you achieve this balance and what are the steps you can take to calculate the most appropriate price for your property? Our experienced team at SGI Property Management will help you answer these questions so you can calculate the optimal rent for your Dallas property!
Find Comparable Homes
A good place to start when determining how much rent to charge is finding a few comparable rentals within your local market. A comparable rental is one with similar characteristics to yours.
Features you can look for when comparing an investment property are location, square footage, and amenities. Attractive features allow you to increase the rental price whereas their absence can indicate a lower price is more appropriate.
Information on comparable properties can be accessed in person or through online listings. It’s always helpful to take a stroll through your local market and find out what similar properties are charging for the rental price. Open houses for rental units provide a great opportunity to do this!
Alternately, you can research rentals on websites such as Zillow, Hotpads or Trulia to get similar results. Some of the things to look out for include:
Neighborhood
Ideally, you should compare rentals in the same area as your property. A larger distance between properties can cause prices to vary considerably due to the neighborhoods having different levels of desirability and diverse socioeconomic demographics.
Property Size
Try to identify which are similar in size to yours! This will help you decide how much money to charge your renters during the lease. You may want to consider factors such as square footage or the number of bedrooms and bathrooms. It is also advisable to avoid comparing single-family homes with multi-family rentals as the former tend to fetch higher rental prices.
Property Age
In rental markets, new homes often command a higher rental rate than older ones. This is mainly due to the preferences of prospective tenants. However, taste is subjective and this may not apply to every property.
Amenities
These features are desirable features that are present on a property. The availability of various features determines the overall desirability of a property! Adjustments to the prices need to be made based on the presence, or expenses, of these features.
Some that are popular with tenants include:
Parking Space
It is safe to say that renters don’t particularly like parking far from home.
Tenants with vehicles are usually concerned about theft, vandalism, and weather damage to their vehicles. So, if your property has access to a parking lot, garage, or underground parking, be sure to mention it! You can charge a premium for parking facilities – especially when parking is sheltered.
Security Features
Having a perimeter fence around your property is good, but what other measures have you taken to enhance your rental’s security? Tenants like to feel safe in their homes so it’s advisable to add additional security features such as smart home technology or security cameras on the property.
Views
Homes that have access to an attractive view command a higher rental rate than those that don’t! If your tenants enjoy watching the sunset or sitting in a well-landscaped garden, your property will be more desirable. You can factor this in when calculating rent.
Neighborhood Facilities
Are there any attractive features in the neighborhood worth considering? For example, is there access to a park, or restaurants and retail stores within walking distance? Is your property located in a good school district or close to a hospital? The availability of these features may be leveraged for higher prices!
Network with Property Owners
To gain a better understanding of the rental market, you can reach out to other landlords in your area!
Fellow landlords can provide good insights on rental market prices and let you know what to expect as well as common mistakes to avoid.
Aside from information on rental prices, landlords can provide other useful knowledge such as their repair and maintenance expenses. This information is important when creating an expense budget for when tenants occupy your property!
The 1-2% Rule
You may have heard of a common rule where landlords charge a monthly rent price of between 1-2% of the property’s value. However, there are many factors to consider when setting rental rates and this rule may not always provide an appropriate figure!
Furthermore, property values tend to fluctuate more than the rental prices. So, if you’re considering using the 1-2% rule, we recommend only using it as a guideline.
Get an Opinion from a Property Management Company
Property management companies have access to numerous resources that help when calculating prices! If you find the process overwhelming, you may want to reach out to a reputable property management company for assistance.
These companies often have access to information that isn’t available on online listings or knowledge that other landlords aren’t willing to share. Professional property managers have a solid understanding of your local real estate market and can advise you on an appropriate rent price for your property!
Conclusion
To make the most out of your property and rental income, it’s important to remember that monthly rent is subject to change. Therefore, it’s necessary to keep a close eye on your local rental market and adjust as necessary!
If you’re concerned about protecting your investment, you should consider hiring a property management company to get the best rate for your rental! Our team at SGI Property Management has a wealth of property management experience in Dallas and can help you maximize the return on your investment.
For more information on our property management services, get in touch today!
