Charging even a small percentage above or below optimal market rates can significantly impact your overall occupancy rates and profitability.

Setting the right rent for your property can be a tricky balancing act. As a landlord, your goal is to find that sweet spot where your asking rent attracts the right applicants and maximizes your returns by avoiding excessive periods of vacancy.

This post will explain some options and methods to determine how much rent to charge for your property. By following these tips, you can help ensure you’re doing your best to deliver solid cash flow to your bottom line.

Things to consider before you research comparable properties

When determining asking rents, consider the property’s location, the unit’s size, and the amenities included. You’ll also want to take into account local market conditions, which nearly always have a considerable impact on how much rent to charge.

Location

In general, properties located in more desirable areas will command higher rents than those in less desirable areas. Tenants are willing to pay more for the convenience and amenities that come with living in a desirable neighborhood with a lower crime rate, better schools, access to parks and shopping conveniences, etc.

Sometimes this means that properties in prime locations can be a more profitable investment than those in less desirable areas, but not always. In single-family rentals it’s critically important to pay attention to the relationship between home values and market rents when evaluating opportunities. 

Some communities with high home values simply make more sense for owner-occupiers because the relatively low market rent doesn’t support investor purchases. Generally speaking, the rent a landlord charges will usually need to be roughly in line with similar properties in the area in order to attract prospective tenants in a timely manner.

Size of property

Landlords and real estate investors typically start with the number of bedrooms and bathrooms, as well as square footage, when setting rent prices. Larger units are typically more expensive to maintain, accommodate more occupants comfortably, and should command higher rents. 

There are always exceptions, so it is ultimately incumbent upon the landlord or property manager to decide how much to charge for a specific unit, taking into account its unique pros and cons.

Amenities 

Amenities can significantly impact the attractiveness of a particular property and its fair market rent. For example, a rental home with a swimming pool or hot tub may warrant a higher monthly rent than an identical home without these features. Similarly, a property with private laundry or an attached garage may command higher rent due to the perceived value of these conveniences. 

Ultimately, the rent pricing decision will come down to a judgment call that carefully weighs each property’s unique features against other similar properties currently available for rent or recently leased in the local market. 

Market and property conditions

In general, if the demand for rental units is high and there are few units available, you’ll often be able to charge a higher rent. On the other hand, if there is an oversupply of rentals on the market, you may need to lower the rent to attract tenants. This is the mechanism whereby market rents increase and decrease over time to keep supply and demand in balance.

The condition of your property can also significantly impact the amount of rent you can charge. Vacancies between tenants are a great time to perform both routine maintenance and capital upgrades that can help a unit show off its best aspects and possibly command a higher rent.

Step-by-step guide to setting rental prices in your area

Zillow’s Rent Zestimate is a valuable tool that provides an estimate of a property’s rental value based on various data points, including comparable rentals and market trends. Note: The Zestimate should generally be used as a starting point, rather than an exact idea of what to charge.

Let’s conduct a sample rent analysis for a single-family rental property in Hurst, Texas, a suburb of Dallas.

Imagine you have a 3-bedroom, 2-bathroom home in this area. The home spans 1,680 square feet and features central A/C and heating, covered driveway parking, and an in-unit laundry room.

Here’s how you can use Zillow to research a competitive rent price:

1. Enter the address of the property

Start by entering the address of the rental property for which you want rent comparables. Zillow will show an interactive map of both active and off market properties that may have already been rented.

2. Analyze rent estimates

Rent Zestimate will give you a starting price for your rental property. This estimate is based on current market data and comparable homes in your area. From here you’ll want to make some adjustments for a more accurate estimate of how you can price your rental.

3. Adjust for market activity

Fine-tune your rental price by considering active listings and recently leased properties. You can choose to use all comparables, or narrow them down by 30, 15, or 7 days. This step helps make sure your rate is in sync with current market conditions.

4. Consider property specifics

Pay attention to the type of homes to which you are comparing your vacancy, such as houses versus condos, as this can affect pricing. Also, make adjustments based on the relative number of bedrooms, as this can heavily influence rent expectations and the supply of truly comparable properties.

5. Search for nearby comps

Generally speaking, the closer a comparable is to your subject property, the more accurate the rent estimate will be. Consider the distance of comparable properties to make sure your pricing reflects local market conditions near your subject property. With Rent Zestimate you can use a radius of 1-5 miles.

6. Evaluate amenities

Compare amenities offered by other rentals, such as parking options, laundry facilities, and HVAC systems. These features can justify setting a higher or lower rental price.

For example, while your property may have the same number of beds, baths, and square footage as another nearby property, you might be able to charge more if you have a brand new kitchen or recently upgraded bathrooms.

Once you’ve exhausted what Zillow has to offer, consider supplementing your research with online listings searches or contacting a local real estate agent or property management company to get additional perspectives. Once you’ve found some similar properties, note the prices they charge and use this information to help you set your own rental rate. 

Collecting rent from your tenants

Once you’ve set the rent, collected applications, screened your applicants, and completed the lease signing process, you can turn your attention to more enjoyable tasks, like collecting the monthly rent!

Stessa’s rent collection feature is designed to simplify and automate the rental collection process for landlords. It offers an easy-to-use interface that reduces manual effort and helps to ensure timely rent payments.

By integrating advanced automation features, Stessa allows landlords to set up recurring ACH deposits, manage tenant reminders, and update tenant ledgers effortlessly—all while maintaining robust security measures to protect sensitive data.

Stessa Rent Pay offers:

• Automated rent reminders to tenants
• Recurring ACH deposits for hassle-free, paperless transactions
• Option to charge tenants late fees automatically or manually
• Instant notifications of rent deposits
• Automatic tenant ledger updates for accurate financial tracking
• Integrated accounting tools to balance books effortlessly
• Secure data protection with multi-layer encryption and strong access controls

Streamlining the leasing process with Stessa

Stessa also offers a comprehensive solution to help with every step of the leasing process. With its all-in-one platform, landlords can quickly and easily manage every step, from marketing vacancies to signing leases:

1. Vacancy Marketing: Stessa automates the listing of vacancies by utilizing pre-stored property information. The software makes sure your listings reach a wide audience through syndication with Zillow’s network. This maximizes exposure to potential high-quality tenants, helping to reduce the time a unit sits vacant.
2. Tenant Screening: Integrated screening tools offered through Stessa’s RentPrep integration help protect your property from problem tenants. This includes comprehensive background checks and full credit reports. These tools help landlords make informed decisions about prospective tenants, minimizing the risk of defaults.
3. Lease Signing: After helping you select the most qualified tenants, Stessa makes lease signing a breeze with its handy library of legal documents and easy eSigning through DocuSign. This makes it easier to get your new renters settled in quickly.

Learn more about Stessa and get started for free

Summary of tips for setting the right rent price

When it comes to setting a rent price, landlords have to strike a delicate balance to receive competitive rental income while avoiding the downside risk of allowing a unit to sit vacant for long periods of time.

Here’s a summary of what we covered above:

• Evaluate neighborhood trends: Keep an eye on the current rental market trends in your neighborhood. Factors such as new developments, changes in local amenities like parks or shopping, or shifts in population dynamics can impact demand and pricing.
• Consider seasonality: Rental prices can vary by season. High demand periods, like summer, may allow for slightly higher rents, while slower leasing seasons may require more competitive pricing to attract tenants.
• Account for unique property features: Highlight unique features of your property that can justify a premium. These could include a recently renovated interior, energy-efficient appliances, or proximity to public transport.
• Factor in maintenance costs: Make sure your rental price covers not only the mortgage and insurance but also potential maintenance and repair costs.
• Understand your target tenant: Different types of tenants may be willing to pay more for certain features or locations. For example,  young professionals may be willing to pay more for a central location with easy access to public transportation, while families may be more interested in larger homes with outdoor space.
• Take rent comparables with a grain of salt: While comparables provide a good starting point, they may not account for specific property details like the size of the kitchen or recent upgrades. Always consider the unique aspects of your property.