Choosing the right rental rate to charge can be difficult. You’re probably tempted to demand a large sum, but by doing so, you’ll have a hard time finding good tenants and filling vacancies. Likewise, by setting your rent too cheap, you will also risk your bottom line.
Below, you will learn more about setting the right rental pricing and finding the sweet spot for your South Florida rental property.
Why do you need to set the right rental rate?
Before we go into the details of what constitutes a fair rental fee, it’s worth noting why it’s critical to get the pricing right:
1. It helps you attract tenants
You won’t be able to find your ideal tenant if your rates are too inexpensive. On the other hand, if your prices are too expensive, no one will want to rent your property, and you run the risk of poor cash flow. With that said, you should aim to find the sweet spot for fair market rent..
Consider the common income in the area where your property is situated. You should set your rental fee based on similar salaries to fill your rental property fast.
2. It covers your ongoing costs
Your rental property is a real estate investment. If your rent isn’t enough to pay all of your property’s expenditures (e.g. utilities), you haven’t set a suitable rental price. A property management company can help you determine the ideal rent rate for your particular market.
3. It allows you to maximize your investment
As a rental property owner, there’s a good chance that your goal is to make as much money as possible. By setting the right rental rate, you’ll be able to guarantee that you get what your property is genuinely worth – no more, no less.
How can you set the correct rent rate?
You can’t your rent to guesswork. Here’s how you can guarantee you set the right rental rate:
1. Check local laws
Compare your price against your state’s rental rules and regulations. It’s important to note that rent regulations vary from city to city and state to state, and they are ever-evolving. Be absolutely sure that your rental rate does not break any law on rent, late fines, etc., particularly in rent-controlled areas.
If your rental property is in Florida, you’re free to set your rental rate. There is no “cap” on how much you can raise the rent in Florida.
2. Compare your property to similar properties
One way to set the right rental rate is to compare your property to similar properties in the area. Through this exercise, you will gain a general overview of how much you can charge for similar properties. In other words, you’ll get the rental range. You can also compare your property against past listings using online tools such as Zestimates.
Alternatively, you can ask a South Florida property management company to look into price comparisons. They will look for homes with the same number of bedrooms, bathrooms, and amenities, and compare your current price with these properties’ current prices.
If your property is priced lower than these “comps” (properties that you compared your property to), it’s safe to assume that you can raise your rent.
3. Consider the 2 percent rule
The 2% rule states that the monthly rent should be about 1 and 2 percent of the property’s current value. However, do note that this is merely an estimate and should not be the basis for your rental rate. It’s not a replacement for comparing rents against similar properties or single-family homes.
4. Consider the rental demand
Demand can increase or decrease the rental rate of your South Florida property. When there’s an economic downturn, the demand for rentals will rise, as fewer people can afford to purchase or own a property. Similarly, as the school year starts, single-family homes will be in demand as families will likely want to relocate to where their kids attend school.
In general, the greater the demand, the greater your rent can be. However, if the demand is low, you’d probably want to lower the rate otherwise, no one will want to rent your property.
5. Set the rate according to the season
Bear in mind that the season has a big impact on rent pricing. The demand for rental property tends to be stronger during the spring and summer seasons, but it tends to take a downturn during the winter seasons. This is because tenants believe that moving during the winter months is problematic for them. In addition, most people (particularly families) do not want to move during the middle of the year so they don’t end up disrupting their children’s classes.
Again, if the rental demand is good, you can increase your rental rate. However, if the rental demand is low, you can either lower your rental rate or allow it to stay as-is.
6. Take a look at your amenities
You don’t need to copy the rental rate of a similar property. Remember, your property may have amenities that other properties don’t have, which is why you should price the rent based on:
- Does your condominium unit have a 360-degree view of the city? If it boasts a desirable view, you can raise your rent. Your tenants will be willing to pay a premium if it’s worth it, anyway.
- Property improvements. Have you improved the property in any way? Let’s say you replaced the floors with hardwood, or you broke down the walls to create an open floor plan. If you have, go ahead and raise your rent according to your property’s current value.
- Floor level. You can raise the rent for properties on the upper floors, as they probably have a better view. However, if your views are obstructed, the floor level won’t matter at all. Don’t forget to consider if your building has stairs – if it doesn’t, you need to lower the rent as people will not be willing to go up and down the stairs daily.
- The number of bedrooms. In general, the greater the number of bedrooms, the better.
Price Your Rent Right With Luxury Property Care
You’ll never wonder how to price your rent right now that you know these tips and tricks. However, if you want the help of real estate professionals, feel free to partner with Luxury Property Care. As a full-service property management firm, we’re here to guide you through everything – even setting the right rental rate.