How to get my rental price right?

Question

Hey everyone,

I seem to be having an issue pricing my rentals (2). The first I got a new tenant in June and listed it (2 bed 1 bath 1000sqft) for $1,400. According to rentometer.com that was extremely high, but looking at other rentals in the area it wasn't much higher. I got 32 contacts in the first 24 hrs. I just listed my second rental last night (3 bed 2 bath 1440 sqft) for $2,000 and had 6 contacts in the first 30 minutes. That morgage is $1,320 so I'm making good returns there as well but again rentometer.com said it was extremely high. Other FB listings are around $1,800 for new construction. So am I pricing them to low? How do you guys decide what to price a rental?

Jeff He · Answer

@Tyler Miles

In my opinion, the best thing to do is to put yourself in the shoes of a renter. Visit all the sites you would normally visit if you were looking for housing. That would give you a good sense of what the market rents are. It also gives you a floor of what anyone who wants to have a roof over their head must pay.

Chris London · Answer

@Tyler Miles,

I get a baseline idea from the property's previous history, rent-o-meter and zillow as well as AppFolio (PM software). However, the reality is most potential tenants look in earnest over the course of a week. For this reason, you need to look at your competition during that week that you are marketing the property.

I only use a few filters. For example, if I'm renting an SFH 3/2 1400sqft I'll go to a rental website and use the filter for: 'home type', 'city' & 'pets'. Then I'll see what's currently avail and how what I have stacks up.

Finally, don't put much stock in metrics like 'views' or even generic e-mails from potential tenants that ask if the property is still available. The majority never reply back anyway. The metric I use is showings and qualified applications. If you receive more than several + qualified applications over a weekend then you have possibly priced the home too low.

You might also consider stating the city you are renting in your post. You might get more specific feedback from BP-ers in that market and what they are seeing.

Best of luck

-C

Bob Okenwa · Answer

I use Rentometer and similar sites more like a rule of thumb more so than an actual reflection of the rental market. If I were you, I'd cross reference FB Marketplace, Apartments.com, Zillow, Trulia, Realtor.com, etc. to get a sense of what other properties are listed at and how it stacks up to your property.

As for what rentometer says about your listing, you didn't provide info as to what your inputs were so it's hard to say what if the site is way off or not.

As for what rentometer says about your listing, you didn't provide info as to what your inputs were so it's hard to say what if the site is way off or not.

Adam Martin · Answer

When I know I have a rental coming up for listing I go on Zillow and save every house that comes up for rent.  I then use this data to see what price range others are charging as well as more importantly what has moved.  I price based on what’s out there and there are times I got well above what i was expecting based on how high the comps were and the scarcity of them available at the time.  You are right to question that too many responses can mean the price is too low but also consider the inventory in your price point, too few houses may mean more interest.

David A. · Answer

If you are using the freebie version of rentometer your single family home is probably being compared to apartments / multi-family comps which can skew down your average rents. There is a price premium for having a backyard, not sharing walls or even allowing pets that just can’t be factored in with that site.

Scott M. · Answer

The only way to use rentometer is to see what comps they are using and then you can make your own adjustments from there based on size, beds, baths, basement, garage other features and most importantly the condition.  New construction is fine but often doesn't have the charm or appeal of a more established area.  Just depends on where it is, how close to amenities, schools etc.  did they cut all the trees in the area for example?  can take decades to be a "nice" area if you like trees.

Same with Zillow, everyone will look at it so you need to consider it but use it more for the comps and then see.  Getting a lot of guest cards doesn't necessarily mean you priced it to low.  For sure can be a key sign but how many actually fill out pre-qual, view, apply etc.  You may find you get zero conversions because you priced it to high once they see it.

Sounds like you did a good job of comparable, see how the process goes.

Heigo Protten · Answer

Taking into account that you have probably made prior analysis that you can turn a profit by renting property in a specific area, I would set a target goal for myself in terms of profitability (also taking into account the future costs associated with maintaining the property, e.g repairs, repaints, etc). That would then become my baseline price of what I NEED to get each month. Then, ofcourse, I would look at other similar properties in the area to see whether I can try to exceed my minimum profitability level.

Grigory Pekarsky · Answer

If you are renting out your house, you have to make sure that you get the best price possible so that you can also cover all of your expenses. So, apart from estimating your price by checking similar properties in the area, make sure that you also factor in all of your expenses such as appliances, utilities and taxes when figuring out how much rent to charge. Make sure it's right for the property type. The real estate market has shown signs of improvement over the past months but there are still significant differences between cities and housing markets within cities.

Joe Splitrock · Answer

In some markets rent prices have been moving up quickly this year. I think it is better to monitor Zillow or other listing sites to see what the current market rate is for similar properties. Response rate may or may not be a sign of pricing accuracy.

High quantity of responses doesn't mean quality. At any given time there is a number of poorly qualified applicants that are looking at every property hitting the market. You want to filter these people out by putting qualification standards in the listing and using prescreening questions.

Low quantity of response doesn't mean price is too high. If you are going a job weeding out the less qualified, you may have to wait a few days for the right person.

Also keep in mind that price attracts people looking in that price range. You may list a $1400 market rate property at $2000, only to find people disappointed when they look at the property. In other words, you may get interest based on price point, but not get applications.

Christian Rojmar · Answer

@Tyler Miles, the fact that you got 32 contacts in the first 24 hrs suggests, to me, that you may be pricing it too low. How many applications did you have in the first few days? If qualified applications are stacking up, you could probably raise rent.

How to get my rental price right?

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