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How Much Rental To Charge Your Tenants
Coming up with a ball park rental figure to charge is actually not that difficult. If you have a real estate agent working for you, you should check with him first.
Other than that, there are many methods to find that elusive magic figure.
Among them, the best way is to aggregate data of rental rates for properties that are similar to yours.
The first thing that you can easily do is check out the classifieds section in the newspapers. Take a look at what other similar types of properties are being rented at and compare their location to yours. Call up the listings that you find a good match to your property to probe for details.
It does not matter whether the call is picked up by the landlord or real estate agent. Ask for details like what is the floor area, number of rooms, fixtures and appliances included for the tenant, etc.
Don’t worry about sounding like a rookie and being embarrassed to ask questions.
Get as much details as possible.
You can expect owners and agents to give rave reviews of their properties.
So if you can spare the time, take a joyride to the listings you have shortlisted to have a real look at the amenities available in the area. Pictures and maps are never good replacements to a real physical observation.
Why would you go through the trouble of do these?
Because this is what a tenant would do before signing up with you. A tenant would browse the classifieds, compare between available apartments, and visit the place.
Once you collate and tabulate all these information collected, you should have a fair amount of reliable data to estimate how much rental to charge your tenants.
For example, if you had gathered the rental charges for 10 different properties, you can total them up and get an average rental per square feet. Multiply that to the floor area of your property and you will get an estimated rent to charge.
A second method to find out how much to rent is by calling up a property management company.
These operators make it their business to manage properties and collect rentals for the property owner who had hired them. They are more in tune with rental rates than real estate agents themselves. This puts them in a position to be able to provide you reliable data at any time. They will also be helpful as they want you to hire them.
You can use this opportunity to build a relationship with them as well.
It is easy to say that you do not need to hire management companies to work for you. But one day when you unexpectedly find a multi-unit property opportunity on your lap, the first call you are going to make is probably to a management company to inquire about what they do.
Make use of every opportunity to build a relationship with these operators as you will find them a lifesaver when you run into bigger property deals.
It is laughable how many newly minted landlords do not spend enough time to go through data and decipher them. They buy properties based on mass market reports and charge premium rentals above market rates.
If you do not charge enough, you are losing money. If you charge too much, you face the prospect of vacancies. And if you simply have to charge premium rentals just to break even, you probably got into the wrong investment deal in the first place.
Determining a proper rental is a balancing act you must master as you go through more deals.
Here are some other commonly used factors to determine the ballpark range to set your rental price:
- Type of property. e.g. Duplex, studio apartment, regular apartment, single family, etc
- Number of bedrooms and bathrooms
- Floor area, livable area, land area, built-in area
- Amenities and facilities
- Unique special features
- current market rate for similar properties
Finally, don’t forget to take a look at the local real estate listing classifieds to get a feel of the going and market rate for properties similar to yours.
You might even want to pose as a potential tenant and call up the landlords to learn about their unique selling points and how they emphasize them.
When you challenge their prices, notice how they handle objections. Their experience can be priceless and worth more than any other sales seminar you ever attend in life.