Whether you own or manage one rental property, or hundreds of rentals across the country, you need to be able to set fair market rents confidently. If your rent is set too high, it can sit on the market and you will miss out on monthly rental income. And if the rent is set lower than the competition, simply put, you will leave money on the table.
As we know, rents vary greatly from market to market, but can even differ from one street to the next within a single neighborhood. Obviously, many variables can impact the rent you can charge for your rental unit including: location, type of building (duplex, apt. building, etc.), size/square feet, amenities (pool, roof deck, etc.), age of unit, # of beds/baths, etc. These variables fall into the “science” of setting rents, – like having access to reliable rent comp data. However, setting rents is also an art form. You need an understanding of the subtle distinctions in a local market (and a little self-restraint) to get it right.
Don’t be fooled that any one rent report, website or data point can tell you the perfect fair market rent. We recommend that you tap into a few resources (a more holistic approach if you will) to help you set rents for your rental property.
5 Ways To Help You Confidently Set Fair Market Rents
- Stay up to date on the economic and business activity in the local market (i.e. Is it thriving? Are stores closing down?). Economic activity is one of the key drivers of rental housing demand and it can impact the rental market in unique ways. For example: The current economy in Boston, MA is hot! Rental housing is in high demand, leading many renters to forgo amenities and perks in favor of securing a lease landlord can afford to make less concessions when negotiating.
- Find some rent comps. Check local apartment listings using the local newspaper, use online apartment guides, or websites like Craigslist and Rentometer to get a feel for the “going rents”.
- Chat with a local real estate professional about their take on the market or a specific neighborhood. Local experts (property managers, brokers, agents, appraisers, and lenders) are especially good at identifying the drivers of housing supply and demand unique to your market – jobs, local ordinances, building permits, zoning for a new apartment building, etc.
- Seems basic, but use “rent per square foot” whenever possible as a benchmark. This allows you to encapsulate into a single number all the subjective variables of rent and provides you a basis for comparison across different units, locations, amenities, etc.
- Check your local apartment or rental housing association for research and other information they may provide about local rent levels – past, present, and future. This is especially important for real estate investors and developers.
Setting rents confidently is as much of an art as it is a science. However, with good current and historical rental data and a thorough understanding of the local market and market conditions, you can set rents with confidence.
by Liz Boksanski