Determining your rental price can be one of the biggest questions many property owners have. Because the market is always in flux, you may wonder if the price you name is right, even if you’ve been renting a unit locally for several years.
The answer, unfortunately, is not always that straight-forward. In this post, we’ll discuss several factors that go into determining rental rates for a single-family home or apartment unit here in Columbus – though these factors apply more broadly across geographies, too. Understanding the effect these factors can have on price will help you determine how much you should expect to earn in monthly rent for your rental property.
5 Factors that Can Affect Rental Rates
- Location – While you’ve heard the adage, “Location, location, location” when investing in real estate, the same is true for rental properties. The better location, the more you can charge for rent. If you’re in a good school district or a popular downtown area, you’re going to be able to charge a premium. If you’re in a less desirable area, you’re not going to be able to charge as much.
One thing to be careful with when it comes to location, however, is that you don’t want to over-improve a unit for a given area. While the unit itself may be very nice, you may not be able to secure a tenant who is willing to pay a higher price if it’s in a less desirable area.
- Condition – In general, the nicer the condition of the property, the more you can charge for rent (with the caveat we just mentioned above regarding location). This goes for the exterior of the property as well as the interior. How up-to-date are the finishes? How well maintained is the property? Keep in mind that even if it feels like you just renovated a property, the finishes and general condition of the unit do experience wear and tear over the years, and sometimes those years pass more quickly than you realize. It’s important to keep on top of updates so the unit stays modern and relevant to renters.
- Competition – The market is what sets the rent for a given unit, not the landlord. It’s important to remember that prospective tenants are comparing and contrasting the value and cost of your rental unit against every other rental unit in the city. If there are several other apartments around you, that’s going to set a cap on how much you’ll be able to charge in rent. If there are not a lot of rental units, that could be a good thing because it means there is not a lot of competition. On the other hand, it could also signal trouble because it means there is not a lot of demand for rentals in that area.
- Seasonality – Depending on geographic location or if the market runs on a seasonal schedule, there may be effects on the rental market. Here in Central Ohio, the market is slower between November and January, so we’re not able to charge as much for rental units during this time. In late spring/early summer, things pick up again and so, too, does the amount one can charge for rental units.
- Tenant Screening – Somewhat paradoxically, the stricter you are with your tenant screening process, the less you can charge for rent. Conversely, if you’re doing very minimal tenant screening – by that we mean not reviewing a tenant’s credit or criminal history – you can usually charge a premium. Often that’s because folks who may have a troubled history are happy to pay a little bit more in rent just to secure a place to live, as they know some landlords won’t approve them to sign a lease.
On the flip side, those who have a solid history and aren’t worried about passing a screening are more likely to be looking for a deal. They are willing to take their time with their search and want to ensure that they’re paying a fair rental rate for whichever unit they choose. To attract those types of tenants, you may have to lower your asking rent.
As you sort through the asking price for your rental property or a property you’re looking to buy, feel free to get in touch with us at RL Property Management with any questions. We can help prepare a market rent analysis that will give you a more specific number for your given property.
