How do I set a market rent? Isn’t it just a matter of trial and error?
Setting the right amount of rent isn’t necessarily easy. It can be trial and error to find the right rent for your properties for your market. For comparison purposes at least three properties similar in size, features, and amenities in your local area should be used to determine a market rate.
Setting the rent much above the market rent can mean there are fewer applicants that respond to your advertised vacancy. Renters searching for a new rental can very quickly determine the value of a given type of unit in a particular area. For many tenants, a rent that is even a small percentage above market rent will eliminate that unit from their consideration. Fewer applicants mean a reduced pool of screened prospects from which to select a tenant. To fill the vacancy you might need to modify your rental standards or accept the possibility of an extended vacancy period.
Lower than market rent could mean reduced cash flow, perhaps a negative cash flow. However a slightly lower than market rent could also result in filling a vacancy sooner and help offset reduced monthly revenue.
There are many factors that influence market conditions and, accordingly, rent rates. Rent rates vary from area to area, location to location within an area, and market supply and demand. Influences such as the location of the property, the condition of the property, its amenities and upgrades, along with unit size and floor plans can attract the attention of renters looking for new housing.