One of the more anxiety-causing tasks for a landlord is determining what to set the rental rate at, especially when the economy is unstable. As a Baltimore property management professional, here are some of the questions we've been hearing:
- Is it smarter to offer a lower than normal rent to get a tenant now?
- Should you price normally?
- Should you make it a little higher to ensure you have a financially stable tenant?
- Should you give up and sell your rental property?
We think that last question is a no: even in tough times, it is still possible to be a successful landlord when you have the right resources. Plus, what brings in more income, selling a house now, or collecting rent while it appreciates and can be sold for even more down the road?
So when it comes to setting the rent, let's assume we're not in the middle of a pandemic for a while and start there. On any given day, how does one set the right rental rate? Consider these steps, and you'll be off to a good start with your potential Baltimore rental!
Perform a Market Analysis
If you were to apply for a business loan (not that that's easy right now, but bear with us), you would need to provide a plan showing that you've done your homework. This blueprint would show that you are reasonably assured that all things considered your business have a better than average chance to be successful. In this plan, you'd need to include a market analysis in those plans outlining who your competitors are, what products are competing with yours, what your competitors' strengths and weaknesses are, and how you intend to compete in that space.
Market analysis for a rental property is similar, and it compares your business (your rental property) to others in the area. This is where your love of spreadsheets can really shine (if you're not as much a fan of crunching column after column of numbers as we are, we can also answer this question for free!). Here are the elements you need to research to help you set a good rental rate.
How Many Vacancies Are in Your Area?
You'll notice we listed apartments as sources of available rentals: while not a direct competitor with a house, apartments are often a 'substitute good' for renters, so it is important to know what is going on with that space as well. If there is a shortage of apartments available more renters are going to look for rental houses. If there is an abundance of apartments on the market, you'll need to be more competitive with what apartments offer to compete.
Vacancies alone don't tell the whole story, though. How many rentals are in your area? Apartments? Houses? When you understand the percentage of leased properties, you get a better idea of how scarce your property is versus just what is available. These are just some of the figures we handle when deducing the right rental rate as your Baltimore property management partner.
Average Price per Square Foot
Price per square foot is a great way to compare rental rates and set a rate for your property.
- Pull up that spreadsheet and compare the price per square foot (usually calculated for you on sites like Zillow) of rental homes that are very similar to yours, similar to yours, and not similar to yours.
- Look at the range of these prices and examine how they change based on amenities or neighborhood.
That isn't it, though: you could go to eBay and look at the prices for acoustic guitars and set a rate for yours and never have it sell. Why? The listed rates are for the available items—the ones that didn't sell.
If you really want to know what you can get for that Fender, look at the prices of Fenders of the same model that sold within the last few months. Now you know what other Fender owners value their guitar at AND what buyers are willing to pay. If you want to sell your guitar tomorrow, you'll list it just under the going rate. If you want to hold out for someone who sees the value of your unique instrument, you'll consider the appraisal value and the market rate to set your price point.
Pricing a rental works similarly: don't forget to not only look at what is on the market, but what is off the market!
Average Time on Market
Many listing sites will let you know how long a property you're looking at has been listed for. Take this into consideration when looking at a rental rate.
Just as you should look at the going rate of properties, pay attention to what property types and rental amounts are sitting unrented for long periods. If you have a house just like one that has been listed for 60 days in your neighborhood, you're probably going to want to consider a lower rate.
We mean it: stop right now! You don't have to do any of this, you just need to contact the Baltimore property management experts here at Rentwell, and we'll let you know what your property should rent for. We guarantee if you live in the area that you've driven by our rentals and never even noticed! This is because we keep them in great condition and don't have a 'For Lease' sign in the front yard. If that's the only kind of advertising you've had available, we cannot WAIT to show you how green the grass is over here!
Let us help you set a rental rate, list your property, and find a great resident to pay the rent. If you don't want additional expert help, download our FREE Tenant Screening Checklist once you've got applications coming in to get started!