As Much As You Want — Unless You Want Actual Tenants.
One of the more challenging parts of managing rental properties is deciding where to set your rental amounts. Charge too much, and you’ll have unwanted vacancies. Charge too little, and you’re leaving money on the table and potentially inviting a lower class of tenant that may not properly care for your property.
Fortunately, enough people have faced this dilemma in the past that there are some decent, proven methods of determining what your rent should be.
When you get right down to it, the amount of rent you want to charge is “the highest amount that will keep your rental unit full” — but that’s not an easy number to discern.
Fair Market Rent
Fair Market Rent (henceforth FMR) is simply “the amount being charged for similar properties in the same area”. In order to determine the FMR, you’re going to have to do quite a bit of research. First, you’re going to need to find similar rental properties in the same or demographically similar areas. Then, you’re going to need to make sure that at least the following attributes of your property and the properties you’re comparing are similar:
Number of Bedrooms
Number of Bathrooms
Once you’ve found a few similar properties in similar neighborhoods, you can start your research. Your goal, as you might expect, is to find out what those landlords are charging for rent. Once you have enough representative samples, you’ll have a good idea of the rent you can swing for your vacant property.
Techniques for Building Your ‘FMR’ Database
Check the Competition Out Online
There are several resources you can access to get rental information on properties. Often they’ll be listed on CraigsList, ApartmentsForRent, Zillow, or similar resources, with the rent listed right there in black and white. If you can’t find a particular place online and you really think it’s highly relevant to your situation, you can call a real estate agent and see if you can get some ‘insider’ info on the property. You can also use this tool to get an idea of what the HUD Section-8 rents in your area are which can at least give you a starting place for your deliberations.
Pretend To Be a Prospective Tenant
Probably the most straightforward way of getting rental information — call the landlords of similar properties and ask them – even set an appointment to view the inside of a rental in your area. Just don’t waste too much of their time or get drawn into filling out a lot of paperwork; if they’re not willing to disclose the rent without a fuss, move on. It’s not worth the hassle.
Talk to a Local Real Estate Agent
Agents make their living off of knowing what the optimal rent for a given property is. Not all agents deal with rentals, so look for one that has rental listings in your general area.
In the end, naturally, you are the final arbiter of how much rent you’re going to charge — but the market will determine whether your decision is going to leave your property vacant or full. The ideas above will usually get you to a solid number that might not be the “highest” possible rental price, but will be a number that nicely balances vacancy time versus rent income.