2020 has been a tough year for every landlord in California, especially due to Covid-19 but life goes on and for many landlords they may be wondering how much they should be charging for rent in 2020.
In this article, we will answer this question and provide landlords with a simple method that they can use to figure out the correct rent for their properties.
First: What Is Market Rent?
The term “market rent” refers to the current average rent price for nearby rental property. Remember, rent is determined by the real estate market value. So when determining how much to charge for rent, what other landlords are charging is valuable information.
However, keep in mind additional variables that can affect your rent, such as:
- The number of bedrooms and bathrooms
- Any special amenities
- Square footage
- Single-family homes vs. apartments or condos
- Garage or storage space available to tenants
- Pet policies
Prospective tenants may place more value on certain amenities, like pet-friendliness. That might mean higher rents. Just pay careful attention to your return on investment—and your boundaries.
Calculating Market Rent Prices
In addition to browsing local rental listings, we recommend signing up for Rentometer, which costs about $100 per year. This website allows you to compare monthly rents for similar properties by city or zip code. It gives you the 75th and 90th percentile, so you can estimate the highest applicable rent and the lowest rent. Most likely, your property is going to fall somewhere in the 90th percentile.
This is a great place to start, so use it as a baseline. Don’t blindly rely on the data provided on Rentometer though, because you don’t know what those properties look like. Pairing this with your own research is the best strategy. For example, go on Apartments.com or Zillow and find nearby properties that resemble yours. Pay attention to the year built, the number of units, amenities, convenience, interior and exterior finishes, and inclusion or exclusion of a washer and dryer. It’s unlikely that you’ll find an exact match, but this is still enough to get a good estimate on the rent.
You can also go low-tech—simply drive around your neighborhood. If you pass any properties up for rent, call their owners and ask how much they are charging. This will give you a rough indication of how much you should be charging.
These methods will help you understand the viability of different rental rates.
Know How Occupancy Rates Affect Rental Price
What’s the average occupancy rate in the area? Is it 95 percent or 85 percent? How’s your property’s occupancy rate compared to the region’s? You don’t want it to be higher or lower by too much.
If your occupancy rate is much higher than the regional average, then your rent is probably not aggressive enough. If it’s a lot lower, then your rent might be too high—or you might have a much bigger issue than just pricing.
Contact RPM Central Valley
For more information on how to set the market rent for your property, or to speak with us about our property management services, contact us today by calling (209) 572-2222 or click here.