Now you have bought your new investment property, undoubtedly you will want to fill it with quality tenants and start receiving your rent.
But how do you know what to set your rent at?
A successful landlord knows to set their rent at a fair rate that complies with Landlord-Tenant Law and attracts tenants while still covering costs and maybe even making a profit for themselves. They know where to look to determine the rent average rent of the area and the value of their own unique amenities to calculate an overall fair rent.
So, we at Florida Property Management and Sales have put together this guide to help you set your rent at the correct amount to satisfy both you as a landlord, and lure in prospective tenants.
Compare with Your Competition
As you research what you should be charging as rent for your South Florida investment property, the first place you should look to is your competition:
Local Area
Look at similar properties on the market in your town or city. But you should also spend time looking at prices in your precise location. Prices can vary even from street to street, so the more specific you can be, the better.
Bedrooms & Bathrooms
When calculating your rent, you will want to compare against similar-sized properties too. As generally, properties with more rooms will charge more than smaller properties in the same area.
Type of Property
Single-family homes generally command a higher rent than multi-family homes which should be considered when calculating rent. So, compare your property to similar property types for the most accurate rent comparison.
Age of Construction
Prospects tend to pay more to rent in newer buildings than older ones. So if you own a property in a new building, you may be able to charge a premium.
Once you have researched your local area, along with similar sized and aged properties you’ll have a good place to start when calculating your rent. But where should you look to find this information?
Finding Comparisons
When you are looking for comparisons there are a few places you could start:
- Online ads: Online resources like Zillow or Trulia are great places to find comparable properties.
- In-person: You could visit comparable properties to get the full buyer’s experience.
- Consult a property management company: property management companies like us at Florida Property Management and Sales have plenty of experience setting rent and could help.
Add in Your Amenities
Each property has its own unique amenities, features, and benefits. So, when you calculate your rent, you need to understand what sets your property apart and how to use these features to calculate your rent.
Here are some characteristics of a property that would influence rent price:
- View: The right prospect will pay a premium for a great view.
- Appliances and Fixtures: Modern appliances really help to attract more prospects.
- Level: Higher levels in larger condo buildings or multi-family properties are generally more desirable than lower ones.
- Extras: Does your property have a walk-in closet? A balcony? Or anything else that uniquely sets it apart? Make sure to include that in your rent price.
Creating Profit Through Rent
Part of setting the correct rent for your South Florida rental property is making sure you cover all your expenses. After all, it’s not much of an investment if it’s costing you money.
When you set your rent, you want to first calculate the following:
- Any mortgage payments you have (if applicable). If you have mortgage payments to make on this property, you will want your rent to cover them.
- Maintenance costs and repairs to the property.
- Vacancy costs.
Now you have these values calculated you can add your profit margin on top. Generally, landlords set this to between 1% and 6%.
Landlords see the biggest return on investment when selling the property years later, but the right rent will provide plenty of cash flow in the interim. But setting this too high can put off prospective tenants and maybe violate Landlord-Tenant law.
Monitor Your Viewing Requests
Price is one of the most important aspects a prospect is going to consider when they look to rent a property. So, a good way to judge if your rent is set right is to monitor your viewing requests.
If you notice a significant lack of viewing requests, then it could be that your rent is set too high. If you’re not sure, why not contact us at Florida Property Management and Sales. We would be more than happy to help you set the right rent and make the most of your investment.
Watch the Market
When you are looking at the market at a high level, it’s best to keep in mind the idea of supply and demand. An example of this sort of thinking could be, if the housing market is going poorly and fewer people can afford a mortgage then more people will be searching for rentals.
Additionally, you can consider seasonality. For example, if your property is in a student dense area, the market will change at the start and the end of each semester as students come to or leave your area.
Bottom Line
When you are looking to set the rent in your South Florida rental property there are a variety of things you should consider. First and foremost is the size and location of your property and how it compares to similar properties in the area.
Next, you want to adjust for any special amenities you have access to as well as your costs then maybe add on a small percentage as a profit margin. Finally, check how the market is performing holistically and adjust.
Calculating rent is an incredibly important part of owning a South Florida rental property, so if you have any questions or need any assistance, don’t hesitate to contact us at Florida Property Management and Sales.