8 Factors Affecting Rent Prices

8 Factors Affecting Rent Prices I

FactorsAffect ing Rent

Pr icesYour Comprehensive Guide

to Maximizing Profits

Copyright © 2016 by VerticalRent

All rights reserved. Published in the United States ofAmerica.

DISCLAIMERVerticalRent does not take any credit for creating the images found in this book,these files are acquired from various sources which outwardly claim to be “publicdomain,” and as such no copyrighted images are included with the knowledge of thepublisher of this book. The common sense tips in this e-book should not beconstrued as legal advice. These are guidelines that will help you as a landlord,property manager, or tenant screening provider. Local laws and regulations may differin your area. Be sure to consult with an attorney before rejecting an applicant andensure you are following fair housing laws.

Contents

Introduction............................................................................................................................................................2

R e s e a r c h . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

M e t h o d s a n d T e c h n i q u e s f o r R e s e a r c h i n g F a i r M a r k e t R e n t s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

What Is Market Rent?...........................................................................................................................................3

F a c t o r s A f f e c t i n g R e n t a l P r i c e s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

W h a t T e n a n t s A r e L o o k i n g f o r i n R e n t a l s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

F i r s t I m p r e s s i o n s M a t t e r f o r R e n t a l s , T o o . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

T e s t i n g t h e M a r k e t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Conclusion...............................................................................................................................................................9

8 Factors Affecting Rent Prices 2

ResearchNaturally, as a landlord, you want to make sure you get the most rent possible foryour property. However, it’s important to keep in mind that you must price yourrental appropriately and in line with the local market. Below, we explain how toresearch your local market to ensure you get top dollar for your property.

Whether you are just starting out or you are an experienced landlord, it’s importantto research the rental rates in your local market. You should do this regularly tomake certain you are making the most of your rental property income potential.While it does take time to do this, this one step can help you avoid overcharging,which could result in vacancies, as well as making sure you do not charge toolittle. When done properly, market research can help you reduce vacancies,attract high-quality tenants, and keep your profits high.

Introduction


Before we get started in reviewing how to perform market research, it’s importantto define market rent. This refers to the going rental rate for properties within aspecific area. As is the case with most things, the rent is based on what the localmarket is capable of absorbing. This is precisely why it is so vital that you performthis type of research. You cannot simply set a rent and expect someone to pay it.

First, consider whether your property is multifamily or single-family, because it doesmake a difference in terms of the amount of rent you can charge. Generallyspeaking, a multifamily property will command less rent than a single-familyproperty. The reality is that even a duplex is not going to receive the same rentalrates as a single-family home. Renters prefer the privacy of a single-family propertyand will pay more for it.

Methods and Techniques for Researching Fair Market Rents

There are a few different methods that youcan use to research local rental rates. Oneoption would be to simply drive around theneighborhood and keep an eye out forproperties that are available for rent andthen call to inquire about the rental price.

Another option is to check the local MLS. Todo this, you will need to look for listingsonline, such as on a site like Realtor.com, orcontact a local real estate agent. You couldalso look for rental listings on Craigslist andsimilar online classified sites.

Contacting local property management companies could also provide you withinformation about the going rates for rental properties, as could speaking tomembers from the local landlord association, if you have one in your area.

What Is Market Rent?

48 Factors Affecting Rent Prices

You might also find it helpful to use an automated market rent determination tool,such as Padmapper, Rentometer, or Zillow, but keep in mind that it’s still a goodidea to confirm these estimates by performing some actual research in your area.

The U.S. Department of Housing and Urban Development, or HUD, also compiles alist of Fair Market Rents each year for more than 2,500 metro and non-metrocounties. These market rent prices are developed for determining the rental voucheramounts of government subsidized housing programs, including Section 8.

What does this mean for you? As a landlord, you are probably all too well aware thatlocation is everything when it comes to real estate. If you own rental properties in alower-income area, the HUD Fair Market Rent information could prove to be helpfulto you. On the other hand, if your rental property is located in a more affluent partof town, this information is probably not relevant.

Factors Affecting Rental Prices

In gathering your research, you will likely find there to be a broad range when itcomes to rental prices in your local area. This is likely because not all properties arethe same. Just as single-family properties tend to command higher rental rates thanmultifamily properties, there are many other factors that can affect rental rates.These factors include:

Ø Number of bedrooms

Ø Number of bathrooms

Ø Pets allowed

Ø Square footage

Ø Parking

Ø Washer/dryer

Ø Location

Ø Lawn


Obviously, properties with more bedrooms and baths, with more space, that allowpets, that have more parking, and that are located in a highly desirable area will beable to command a greater rental rate. You should also adjust for any amenitiesyour property either possesses or lacks from similar listings in your area. Forinstance, if your property has upgraded features that other properties do not, youshould add to your rental price. If other similar properties in the area have certainamenities that your property does not, you will need to lower your rental rate.

Whether you choose to allow pets in yourrental is naturally a personal decision.You may find you have more rentalprospects if you do allow pets, at leastwith some restrictions, such as onlysmall breeds. On the other hand, manylandlords are naturally wary of doing sobecause they fear damage to theirproperty, and with good reason. If youdo choose to allow pets, even withrestrictions, keep in mind that you canusually ask a higher rent to compensate for the risk you are incurring. You may alsobe able to charge a reasonable pet deposit.

You should also consider your minimum lease requirements because they caninfluence your rental rates. For instance, if you offer a shorter lease, you may beable to command a higher rental rate. Likewise, if tenants are signing for a longerlease, you may need to adjust your rental rates accordingly. If your rental propertyis located in a homeowners’ association, it’s important to check the rules, as someHOAs will not allow owners to rent their properties on short-term leases.


Is your unit furnished? A furnished rental is usuallyable to command more rent than an unfurnishedrental. Bear in mind that the condition of thefurnishings will likely affect how much more youare able to command for a furnished unit than foran unfurnished unit.

What Tenants Are Looking for in Rentals

Just as with homebuyers, prospective tenants are all looking for certain things in arental in order to be willing to pay top dollar for a property. Some of the items thattend to be at the top of the priority list for renters include:

Ø A property that is clean and well maintained. The reality is that renters are notgoing to pay top dollar for a property that is not well maintained. Quality rentersare looking for properties where maintenance will not be an issue and if thereare any problems, the landlord will handle them without delay.

Ø Location. A property situated near essential services will always garner higherrents than a property in an outlying area. Properties located near schools,shops, leisure facilities, and transportation are most highly valued among renters.

Ø Storage. Most renters today are looking for rental units with ample storagespace. Everyone today seems to have more stuff than ever, and they need aplace to store their belongings without also having to rent a storage unit. If yourproperty provides extra storage, you will likely be able to ask a higher rent.

Ø Amenities. Appliances, such as garbage disposals, dishwashers,washers/dryers, etc., are practically considered must-haves in rental unitstoday. If your property features these items, you will definitely be able to chargea higher rent.

If your property has these features, you can rest assured it will appeal to a largerrange of tenants who will be willing to pay more to feel comfortable.


First Impressions Matter for Rentals, TooYou should also keep in mind the importancea first impression a rental property can makeon a person when walking through the doorto view the property. Updates can betremendously helpful for boosting that firstimpression, particularly when you arecompeting with a large number of otherproperties. Before showing a property toprospective tenants, always make sure thecarpets are clean and the paint is fresh. Many landlords make the mistake of tryingto fill a vacancy so quickly that they do not take the time to freshen it up properlyfollowing the last tenant. In some cases, you may not be able to allow much timebetween rentals to fill a vacancy, but taking the time to freshen up a unit andperform some updates can go a long way toward helping you get the highest rentalprice possible. It's also important to take great pictures for marketing purposes soprospective applicants will be able to see how great the property is before theyphysically tour it.

Bear in mind that you will also need to consider whether there are any restrictionsor government controls regarding local rents. In some areas, there is rent control,which can place an artificial control on the market, so you will need to know if thatis the case when you are evaluating the local market.

Restrictions


Testing the MarketOnce you have decided on a rental price,it’s a good idea to give it a test run. Thiscan be particularly important if you havedetermined that your rental rate should begreater than the average market rate foryour area. Offer your property at the testrate for one to two weeks. Doing so willgive you a good idea as to how prospectiverenters feel about your property and theasking rent. If you have a lot of inquiries,you will know that your rental rate may below. Conversely, if you receive fewresponses, you will know that your unit ispriced too high.

Keep in mind that if you do opt to give your rental price a test run that you do sowith caution. This must be handled carefully, or you could find yourself facingpotential legal trouble. Some landlords have been accused of a practice known asbait and switch by advertising a low price and then charging a higher price. Not onlyis this unethical, it is also illegal.

It's also important to pay attention to the number of people who actually followthrough with appointment to tour the property. In some cases, landlords may noticethey have a number of phone calls but prospective renters frequently cancel ornever show up for their appointment to see the property. When this happens, it’susually an indication that either your property lacks curb appeal or that competingproperties are priced better.

Suppose you show the property to a larger number of people, but you do notreceive any actual applications. This could be an indication that you need toevaluate the interior of the property and consider making improvements or loweringthe asking rent.


Ultimately, the amount you charge for rent will be based on what the current market is seekingat the time that you list your property for rent. By conducting research, you will be able toestablish a fair market rent value for your unit. However, keep in mind that fair market rentvalues can and will change over time, so it’s important to stay on top of this to ensure yourproperty remains competitive.

Conclusion

8 Factors Affecting Rent Prices

Real Estate

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