How to set a rental price?

Question

As a beginner, I’m looking at my first deal and not sure if it’s going to profit the way my wife and I are hoping. Our biggest question is how to set the monthly rent price?

The cost of purchase is around 120k and the realtor tells us the location will bring 1400-1600 a month. However, every example I can find is closer to 1100-1200. How do you tell the going rate?

Is there an app or website that you guys are using to help set rates?

Thanks so much for all of your advice. Hope to hear from you all.

Regards,

David Gates · Answer

@Matt Kelty, I'm a newbie and searching for my first deal too. Running the numbers is something I'm struggling with too. As I was researching rents, I did come across the website rentometer which I believe, @Lisa Maldonado and @Joaquin Camarasa mentioned.

I'd like to expand on this for what its worth. In my area, I see a range for the amount of rents to charge. So here is my thinking, If I see three, four or five different rates, my thought was to take the average of all the rates I found.

For instance, for research and analyzing a deal, if I see one property rent for $900, one for $1,000, one for $1050 and one for $975. Then I'd add this all up for a total of $3925, then I'd divide this by 4 for an average of $981.25.

I'm curious if others have used this average staggery and if this a viable line of thinking when analyzing realistic rents for calculation purposes.

Thoughts? comments? point me in the right direction>>>> :)

Tracy Streich · Answer

Yet another great reason to involve a property manager before you close.   Realtor says oh yeah about $1300-$1400 per month.   Translated "I really just want my 3% and I am not really sure so this sounds good"  (disclaimer:  Not all realtors are this way but most don't have experience renting homes)

Ask a PM with experience.   You don't even have to hire them.   Most PM's are happy to visit for a few minutes and discuss rentals in the market.  If there is a chance they can get you business now or later they will give you some advice on rent ranges.   Even if you don't use them now there may be a time when you are ready for 3rd party management and they will be at the top of your list.

Ricardo R. · Answer

@Matt Kelty most have mentioned some already good sources to price your rental. I believe one member on here brought up 'asking neighbors' I would approach that one with caution... some owner's have had their rental listed high for quite awhile (which of-course means they missed the mark and it's too high), other's are listing even higher and are really interested in appealing to one type of tenant (corporate) and yet others have it listed remarkably low because the property may already be a paid-off and they value a bigger applicant pool over keeping up with the market rents - it certainly doesn't hurt to ask but approach with caution. Wherever you check rental prices via listings always try to look at how long the rental is listed for (aka days on market) that will tell much more. For instance a rental listed at $1,200/mo. with 7 DOM could probably benefit from a slightly higher rent and vice-verso if it's listed 45 DOM it is probably listed to high. Some sources may not have this, so you may have to 'shadow' some listings and keep checking up on their status to see how long they are listed for.

Other key factors that will affect your rental bracket is time of year, amenities included in rent, showing condition. Spring/Summer will typically rent higher than winter. Are the units you're looking at on Zillow including water or HOA fees or other items in their rent price or omitting them? - that makes a big difference. Is the unit occupied or vacant and clean or vacant and dirty? all makes a difference in your rent bracket. @Kyle J. has a pretty good article on sources to use for pricing once you get done reading it head over to and read: Higher Rent Equals Higher Returns... Right?  - for help on where in your rent bracket you should price it... and if you need additional help contact me, I'm in Michigan and have access to rental pricing tools and can certainly help you price it no strings attached. Hope this helps.

Todd Rasmussen · Answer

@Matt Kelty

It sounds like you've already figured out that the going rate is 1100-1200.

I think you will find the most success if you get:

Sales comps from a realtor

Rental rates from a property manager

and construction estimates from a contractor.

Call local property managers give them some specifics and a couple photos and ask for their thoughts.

John Teachout · Answer

Knowing how to set a rent price is relatively easy if there's a bunch of similar properties. Many homes though are all over the place in age and quality of construction. All different sizes, etc. In those cases it's a bit tougher. Another thing that factors in is how particular you are with selecting tenants. Bad tenants will actually pay more for a property than well qualified tenants because top notch tenants have more choices.

We try to keep our properties nice and market them well. We screen thoroughly and it sometimes takes a while to fill them but we're patient. No tenant is better than bad tenant. Never forget that. An empty property will cost you money. A property occupied by a bad tenant will cost you LOTS of money. When we first rent a property, we try for the higher end of the rent range. If it won't rent, drop the price. There's a continuous stream of new potentials so it's a bit different than overpricing a house that's for sale.

Scott Anderson · Answer

I look at closed rental listings on the MLS and check days on market, then listed ones.  Then I check craigslist for listed ones.

After that I pretty much know exactly what the rent should be.

Then I work backwards with the PITIA/maint/capex to get offer price.

I don’t care what they’re listed at.

Joaquin Camarasa · Answer

1) Website: Rentometer.com

2) If you see any neighbor ask. (This is probably the most accurate if you ask a couple)

3) Ask for a second realtor opinion.

4) Check other websites that have that info like Zillow.

Keep in mind rent prices change depending the time of the year.

Courtney M. · Answer

I would check on Zillow for comparable properties. And frankly I wouldn't listen to your realtor if they don't have experience with rentals. A property manager is going to be a better source for accurate information.

Dylan Tanaka · Answer

Keep it simple:ZillowRent-O-MeterCraigslistRealtor friend

Make it a bit nicer than the rest.  Make the prospective tenant jump through hoops.  Set up autopay through an app or your bank.Rinse & Repeat.

Justin V. · Answer

@Matt Kelty

Good responses already.

Rentometer for historical info. Zillow, craigslist, and apartments.com current “for rents” to know where the competition is at.

Zillow owns/partners with trulia and hotpads, so don’t feel the need to look at more than 1 of the three.

I go high end in my market and list at the high end (75th percentile on rentometer usually), but quickly reduce rent as needed.

Current process is (under development):

If occupied I list 2.5 months out.

Don’t bother with anyone who can’t move in/start paying rent the day after the end of the existing lease.

~5 days at my starting price then drop price unless background check, lease signing, and deposit under way or getting close.

$25 to $50 rent drops based on how serious of interest.

~3 days at next price and repeat.

I always charge a monthly pet rent of about $25 per cat and $35-50 per dog in my area based on size and age and discount $10 off for the second pet. I feel allowing pets is a niche, especially big dog owners. I haven’t encountered an irresponsible pet owner yet in my market/price point.

If the unit is vacant talk to people with move in dates less than 2.5 months out and be ready to strike a reasonable deal with people who can move in sooner since you don’t make money on a vacant unit. Reduced rent/not charge for a few days early move in, reduced/waived pet rent.

Good luck.

How to set a rental price?

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