Currently, many landlords are feeling the impacts of inflation. Energy costs and property costs are rising, and this is forcing landlords to increase the price of rent. Nationally, rental costs have risen 11.3 percent over the past year, and it doesn’t seem to be stopping there. As a landlord, then, you have to decide how much you should charge for rent in order to cover these rising costs.
Consider your property’s value
You’ve put a lot of time, money, and effort into your property. As such, it’s only fair that you get in rent what your home is valued for. Many landlords use the 1% rule where they charge 1% of the home’s value for rent. So, if an apartment complex is valued at $200,000, then an apartment in that complex would cost $2,000 per month. Of course, 1% isn’t a hard-and-fast rule; landlords will charge anywhere from 0.8% to 1.1%.
Look at similar rental properties in your area
It’s always a good idea to see what your competition is doing. When determining your rent, take a look at similar properties in your area to see what they are charging. These properties should have a similar size, age, quality, and amenities as yours to get an accurate estimate.
Determine demand
Demand is one of the biggest factors in rental costs. If you don’t have many people looking for apartments, you’ll be forced to lower prices to make your property more enticing. On the flip side, if you’re flooded with tour requests, you can set the rent at a higher price. There are many factors that may impact demand, including:
- The Economy: In a bad economy, more people are looking to rent because they can’t afford homes
- The Time of Year: Fewer people move in the winter, while more people move in the summer
Look at your expenses
Your mortgage payments, maintenance costs, vacancy periods, utilities, and taxes will all take a bite out of your wallet, especially now. Your rental costs should be able to cover the costs you spend to keep the place running.
Rental rates are just some of the many hurdles you will have to jump through as a landlord. Make sure you have a quality real estate attorney at your side to help. Aaron Cox Law is a top real estate law firm in Michigan. Contact us today to see how we can help you.