Since the start of the pandemic, the price of housing has been soaring for the last two years. Did you know that as of June 2022, the average cost of rent is over $2000 a month?
If you're a new landlord, you may not know how much you should be charging tenants for rent. In this article, we'll go over everything you need to know about rental pricing.
What to Consider When Setting Rental Pricing
It can go without saying that the price of a rental property should be affordable to an ideal tenant. What exactly goes into determining the correct price of rent? Let's take a look at some of the ideas you can apply when determining rental pricing for your tenants.
Use the 1 Percent Rule
Many landlords use the 1 Percent Rule as a very easy, straightforward way of determining the minimum they should charge for rent. The rule is as follows: charge monthly 1% of your property's value. For example, if your property is valued at $250,000, then one percent of that value would be $2,500.
While this rule is simple and straightforward, often times property valuations are not. If you're not sure how to calculate the value of your rental property, consider consulting the services of property managers.
Compare Local Rent Prices
One of the best ways to determine what may be a good price to charge for rent is to do your due diligence. This means taking a look at what other landlords in your area are charging.
For example, the average rent for a 2-bedroom living space in Fairfax County is $1,765 a month. If you're renting out a property in this area then right away you will know the price people are willing to pay to live in Fairfax County. From here you can set your own pricing range based on the cost of maintaining the upkeep of your property.
Consider Local Renting Laws
Every state, county, and city or town has its own set of rules and regulations for housing.
For example, some of the rules for New York City drastically differ from the rules in Northern Virginia. In New York City, specific rent control laws put a ceiling on the amount of rent that could be charged for residential buildings built before February of 1947. In Fairfax County, Virginia, there is no ceiling on how much rent a landlord can charge.
It is up to you to do your due diligence and stay up to date with your town or city's housing rules and regulations.
The Bottom-Line on Rental Pricing
Rental pricing is a balancing act. Charge too much and you will scare potential tenants off. Charge too little and you won't recoup the cost of your rental.
With these tips, you will find the right price to charge for your rental and have a strong reference for any rentals you will own in the future.
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