How to determine the right rental price for an apartment

Just bought an investment property and thinking about renting it out? That’s a very smart idea! Investing in real estate is bound to generate profit without losing your assets, which makes it one of the smartest and safest investments. But how do you determine the right rental price?

When bringing your property to market, you need to set the right price for your rental. Setting a low price will cost you income, and setting a very high price may cost you prospective renters. Setting the right price is of utmost importance nowadays because of rent control, annual increase is now powered by governmental laws and rules, so you need to set the right price from the beginning.

There are several factors that can help you set the right price for your unit. The right price should attract tenants to your property and generate a decent income.

Compare prices with similar properties

You should always start pricing your rental by browsing the competition. Take a look at rental prices in general, and pay more attention to properties similar to yours, how much is the rent?

Focus on properties similar in size, preferably within the same block as the property you want to rent before settling on a fair price.

The easiest way is to check online listings, this is a hassle-free way that can show you the range of prices in your area.

Consider finishings and furnishing as well, other apartments may be priced lower because they don’t feature the same luxurious finishing as yours, same goes for furniture and appliances in furnished apartments.

In which part of the neighborhood is your property

That is why we advised checking the block, prices vary in the same neighborhood, according to numerous factors like whether the area is quiet or noisy? How close to the services is it? And also whether your property lies in the old or new part of the neighborhood?

If you live in another area and you’re not really familiar with the neighborhood take a walk in the area when you first get the property and before you start showing it to tenants, you need to be able to answer questions about nearby facilities and services.

Pay close attention to these factors. Not only to determine the right rental price for the property but also to target the right audience when marketing it.

The number of bedrooms and bathrooms VS. the square footage

Some would argue that a two-bedroom apartment is always worth more in rent compared with a one-bedroom apartment. However, what if the one-bedroom two bathroom apartment is 120 square meters and the two-bedroom three-bathroom flat across the street is only 90 square meters?

Yes, the number of rooms and bathrooms in an apartment is a huge factor when determining a rental price but the spaciousness of the rooms is also a factor, you should take both into consideration when checking other properties and when deciding on a price.

Another vital factor is the layout of the property, does it flow naturally? Does it make the best use of the space?

Floor level and view

An apartment with a nice view, garden, sea or other, is always worth more than one without any view. More points if the apartment features a balcony overlooking the sea view.

The same goes for higher floor level apartments, they are always worth more, as the windows usually feature nicer views than lower levels, even if just a city view. They are also further away from the street noise.

For all those reasons you can ask for a higher rent if your property is at a higher level. The only exception to that rule is when the building doesn’t feature an elevator. In such cases, higher-level apartments are worth less than lewer level ones.

What edge do you have?

What is the competitive advantage of your property in the market? Does the building offer premium amenities and facilities? Does the property feature an awesome view? Are the rooms spacious?

If your property is mediocre in everything and features no competitive advantage you may need to compete with the price or offer something of value like equipping the apartment with modern household appliances.

When you decide on that edge, make sure to highlight it when marketing your property.

Market demand is a changeable variable

A variable that changes from season to season and yet cannot be ignored, how is the demand in the market for your specific property?

In times of the bad economy, people downsize and move to smaller apartments, in times of prosper people move to larger apartments. Families tend to move late summer, before school starts, so it’s considered high season for family units.

And sometimes seasons come from out of the blue, many people started looking for units with private gardens or private swimming pools after the coronavirus for instance when kept in lockdown for months.

If the time is right for your property, you can ask for a good rental price, maybe even slightly higher than average. But if the time is not right, you might need to go down a bit to find a tenant.

How much do you pay for the apartment?

This is a very basic factor. Yes, you own the property, but do you still pay installments for it? How much do you pay for maintenance and upkeep?

Do you pay yearly maintenance to the building? Will you include water and electricity in the rent? How much do you pay for them? What about the tax?

The rent should cover all those expenses and still leave a profit margin for you, otherwise, you are wasting your time and money.

Get professional help

A real estate agent can help you set the right price, find the right tenant, keep the property maintained and keep everyone happy!

If you don’t have the time or the energy to deal with all that, and want your profit hassle-free, then find a trusted real estate agent to handle the property.