Clients often ask us: “How do I know how much to charge for rent?” Unfortunately, it is not as straightforward as charging what the property owner “wants.” Instead, setting the ideal monthly rent amount requires thorough rental market analysis and insight into the goals of your investment property. Here's what property owners need to know.
The Importance of Charging the Right Amount for Rent
Why is it so important to know how much to charge for rent? To meet your revenue goals, setting rental prices should never be a guessing game.
Experienced San Antonio property managers can tell you that if your rate is too high, you may struggle to find tenants. As a result, you'll sit with an empty rental property for too long (and no income). However, if the rate is too low for the area, you might attract the wrong type of tenants or fail to generate enough income to cover monthly expenses.
Factors that Affect How Much to Charge for Rent
Now that we have established the importance of setting the correct rent rate, figuring out what to charge can be a complex task. Let’s look at a few factors that can influence the rental rate you should charge for your rental properties.
The time of year can have an impact on competitive rental prices. For a variety of reasons (inclement weather, middle of the school year), renters can be less inclined to move during the winter months. This translates into less demand, which may mean that you need to adjust your rent price slightly lower to ensure that your rental property doesn’t stay vacant for too long.
What Your Neighbors Charge
Before setting the rate for your property, it is advisable to research what landlords for nearby properties ask for homes similar to yours. You don’t want to be much cheaper than adjacent properties and risk attracting the wrong kind of tenants (or losing income). However, you also don’t want to set your rate much higher and have an uninhabited property for a long time.
Just remember to compare apples with apples. Take amenities, property size, and other variables into consideration when comparing your property. If you're not sure how to go about these comparisons, San Antonio property management companies can help!
Property Value: Does the 2% Rule Work?
The 2% rule dictates that a property’s rent should be between 1-2% of the property’s market value. This is a useful tool for making a quick estimate of a property’s potential rental income.
However, it is not a fix-all for setting your monthly rent. Several other factors will influence this number too. In addition, over the last few years, property prices have risen faster than rental prices, so the 2 % calculation may be slightly inflated.
Four Tips to Know How Much to Charge for Rent
To attract good tenants and limit tenant turnover time, calculating a fair market rent value is imperative.
- Connect with other rental property owners in your area to find out what they are charging.
- Scour the internet to weigh up comparable properties.
- Use online calculators such as City Data.
- Enlist one of the best San Antonio property managers to help you to troubleshoot the rent-setting process.
Property Manager vs. Property Owner: Who Sets the Rental Rate?
So, who sets the rental price? Ultimately, the property owner does! However, the right property managers will help you with an informed decision to avoid a rental rate that could:
- Attract poor-quality tenants because the price is too low.
- Leave you with a lengthy vacancy because the price is too high.
- Fail to generate enough rental income to cover your costs and build sufficient cash flow.
Every rental property and owner has different needs. Therefore, there is no one-size-fits-all rental rate for rental properties. The best way to land the ideal monthly rent amount is to work with an experienced property manager and be honest about your goals for a property.
How MHN Property Management Helps Owners Set Ideal Rental Rates
MHN Property Management works with property owners during our initial consultations to determine the best rate for a property. During these conversations, we run the numbers and provide rental rates in a range — instead of settling on "the" ideal amount from the start.
We do this for a few reasons:
- Even after running the numbers and applying our experience to find the most competitive rates, property owners are the ultimate decision-makers and have their own needs.
- As a landlord, you could be sitting with a paid-off property and not have the stress of mortgage payments. In this case, you might have the patience to wait a few weeks for an ideal tenant and prefer to set rent on the higher end of the spectrum.
- On the other hand, if you have decided to rent instead of selling your home before a move, you could need proof that your property is rented for $xx per month so you can get approval for renting a property elsewhere. In this case, renting on the lower end of the range will help you get tenants and sign deals more quickly.
Rental rates should be in line with similar properties for the best chance of success. However, providing a well-researched range with potential scenarios gives owners a chance to choose a rate that fits their goals. Our job is to listen to your goals, then apply the best strategies to get there. Whether you choose a rate at the high or the low end of the researched range, we know we can deliver a profitable property that meets your expectations!
Set the Best Rental Rates With One of the Best San Antonio Property Management Companies
When it’s time to renew a lease or find a new tenant, that means it’s also time to run the numbers again and reevaluate the rental rate to ensure it’s the right price. Get in touch with MHN Property Management to help set the ideal rental rate for your investment property in San Antonio, Texas!