How Much Should I Charge for Rent?

Take a look across the U.S. and you’ll see a wide range of rent prices by city. In 2018, the average rent price for a one-bedroom apartment was $1,140/mo. That’s small change compared to New York, NY, where tenants pay $4,164/mo. for a one-bedroom on average. Travel to Phoenix, AZ, and the average cost is $990/mo. for a similar rental. So it’s no surprise that you’re wondering what to charge for your specific property.

Fortunately, determining how much to charge is super simple. Once you know the factors that are used to set rent prices, you can easily calculate the rate yourself. And getting the right figure matters — for reasons you may have already experienced firsthand.

Price is prominent. A fair rent price attracts more tenants and gives them a strong reason to stick around. On the flip side, renters will move out quickly — or ignore your listing completely — when your price sticks out like a sore thumb in your neighborhood.

There are both controllable and uncontrollable factors that influence rent price. In this article, we’ll break down each type and give examples, too. That way, you can take the guesswork out of charging rent.

Rent Factors That Are in Your Control

The unique characteristics and amenities of your property, and how you maintain and improve them, help you determine a fair rent price. Here are examples of controllable rent factors:

Location

Number of beds, baths, etc.

Renovations in the kitchen or bathroom

Cleanliness of the property

Property upgrades

Landscaping

Timely preventive maintenance

Other fees you charge (security deposit, pet rent, utilities) 

Location is listed first for one main reason. At the end of the day, your goal is to make your rental the most attractive choice compared to similar units in the area.

For example, imagine a nearby rental that was built in the same year, has the same number of bedrooms, and also has a laundry room. It’s renting for $1,400/mo. If you just installed all new kitchen appliances, or offer 24/7 maintenance support, you could easily charge more.

Rent Factors That Are out of Your Control

In every industry, there are larger trends at play, but the rental market is especially reactive. Of the variety of recurring market trends, these are the ones to watch.

Area competition: What are local landlords charging for similar properties? This hugely affects what tenants will pay. Find units with comparable square footage, number of rooms, amenities, upgrades, and build dates.

Seasonality: Peak rental season is May through August, with some of the highest rates of tenant turnover. When so many tenants are looking for housing, and rentals are going fast, you can typically charge more. Pay attention to price fluctuations by season.

Laws and regulations: New landlord-tenant laws and rent control laws affect supply and demand in many ways. Rent control, for example, is theorized to decrease housing supply and raise rent prices.

New construction: When developers build new market-rate buildings, it can raise the average rent price as renters migrate to the area. On the other hand, it may eventually lead to more affordable housing market-wide, lowering the cost you can charge.

Recessions: Whether there are recession worries, or there’s an actual recession brewing, it has a large effect on market behavior. Generally, with more people looking to rent rather than own, rent prices increase.

Market supply and demand: Too much supply creates a buyer’s market and leads to lower rents. Alternatively, too much demand may allow you to charge a higher rent.

Increasingly, there are more renters than homeowners. Make sure your units are priced correctly so you can take advantage of this growing pool of prospective tenants. Now that you know the influencing factors, we’ve rounded up the best practices for calculating rent.

Tips on Calculating a Competitive Rent Price

There are many tools you can use to decide how much rent to charge. You can also double-check your current rate using the following resources and tips.

Follow your neighborhood rent prices for comparable units. An easy way to do this is to check local online rental listings periodically.

If you’re already renting and successfully finding tenants, your rent history is a good marker for what rent can or should be.

Get a rent analysis that uses actual data on your property and local rent trends to give you a rent estimate.

Create a feedback loop for yourself. If you’re getting too few inquiries, consider lowering your asking rent. If you’re getting too many inquiries, try increasing it.

Use a rental property calculator to find a rent estimate among other helpful data like operating expenses and break-even ratio.

If I had one piece of advice, it’d be to price your unit just under or over competitors when possible. When supply is high and area rents are lower than usual, consider adding in perks like free laundry or internet to stay competitive and stand out. When demand is high, experiment with raising rent.

Finally, always refer to your state’s landlord-tenant laws. These regulations set limits on rent prices and other fees you charge. Just consider the recent passing of rent control laws in New York, making it the fifth state to do so. (The other four are California, Maryland, New Jersey, and Oregon. The District of Columbia has rent control in place, too.) You don’t want to be on the wrong side of the law or put your rental in jeopardy, so stay up to date.

Don’t Get Filtered out

Many renters now use popular online rental sites to find housing. More importantly, they are likely filtering their search results by price. You need to give real thought into where your asking rent may fall within a rent range.

For instance, imagine a renter searching for a two-bedroom that costs a minimum of $1,500/mo. and a maximum of $1,700/mo. That means they won’t see your $1,725/mo. rental. Is that $25 really worth missing out on the majority of applicants? Probably not.

Final Advice on Charging Rent

Whether you’re deciding how to price your first rental, or re-evaluating the amount you’re asking right now, it’s important to charge the right amount.

As a landlord, your biggest source of rental income will likely be your tenants’ rent payments. Of course, you want to see a high return on investment. But it’s equally important to find a respectful tenant and keep your vacancy rate low.

Over-pricing lowers tenant demand and costs you time (searching for a quality tenant) and money (months of no rent). Under-pricing causes similar issues with time (scheduling too many showings to meet high demand) and money (the price probably could have been higher). But you’ve got the tips you need to set the right rent price.

Once you’ve decided on a price, receive rent payments on time by letting your tenants pay rent online with Avail. You can easily list your rental, screen tenants, and create a lease, too.