In a perfect rental world, the correct rent for your property would be the amount that would make you the most money on your rental unit. Unfortunately, in the real world of competitive real estate, tenants have the FREEDOM to choose from many differentrental properties, so you have to set your rent correctly every time!

Your goal is to set the rent at the highest point you can to attract tenants, cover your expenses and hopefully put some money in your pocket; cash flow is key to any investment…. but you do not want to set your rent so high that you have to deal with a high vacancy rate from not being able to find a well qualified tenant quickly.

1. The correct rent is based on the desirability of the rental unit

Do not set the same price for all one bedrooms, or set a standard difference in price between one bedroom rental units and two bedrooms rental units. Unless the units are exactly identical, this strategy will hurt you in the end. You should charge slightly different rents based on the desirability of each rental unit.

For example:

Lets say you have an investment property with two three bedroom units for rent. One unit is on the ground level and the other unit is on the second floor. The units are identical except for the fact that they are on different floors and the three bed room rental unit on the second floor has an extra 2 piece bath room.

You may think that setting the same rental price for both units would make sense, but this is not the case. Prospective tenants who see both units will jump on the second floor unit with the extra bathroom because they think they are getting more for their money comparatively. Once the other prospective tenants learn the “good unit” is taken, they will likely search for apartments elsewhere because they now feel the ground floor unit is overpriced. Charging an extra few bucks ($25-$50) a month for the second floor unit would be reasonable.

A few points to consider when setting your rent:

• The view: apartments with a garden or park view are more desirable than those with a view of the parking lot or drive way.
• Updates: units with updated appliances, hardwood floors or other amenities are more desirable than those without.
• Square Footage: a 1,000 square foot rental unit is more desirable than an 800 square rental unit.
• Floor plan: Some apartment layouts are less desirable than other layouts.
• Floor Level: higher floors may be more desirable. The exception is a walk up, where after the third floor; you will have to start lowering the price because people will not want to go up and down all of the stairs.
• An extra closet, balcony or window makes a unit more desirable.

2. Keep your on the Competition !

Check out local newspapers and online ads for other rental properties in your area that are similar to yours. This will give you an idea of the going rent in your area. Do this for a couple of weeks. Keep track of which apartments are getting rented quickly, which apartments have lowered their rent and which ones have been listed for many weeks.

If you see several landlords in your market offering rental incentives to attract tenants, such as a free TV, it may mean that your area is over-saturated with rentals and you may not be able to command the rent you had hoped.

You should even consider going to check out some of the apartments in person and compare them to your rental unit. Ask the landlord/property manager if there is a lot of interest in the property. You should also talk to realtors, landlords, and property managers in your area to see what they think a fair price for your unit is. Once you have considered all these factors, you can adjust your rent accordingly.

3. The CORRECT Rent Will Attract THE CORRECT Tenants

Has anyone come to look at your rental property? If not, the price of your rental may be the problem. If your rent is set too high, or too low, prospective, good quality tenants will steer clear of your rental unit…..thus resulting in a loss of income!!

Although people often equate a higher price with status, if your apartment does not have the location or the proper amenities to back up the higher rental price you are asking, prospective tenants will have no desire to see your rental unit. If your rental is priced too low for the area, believe it or not, people will not come because they may think something is wrong with your property and the people that come because the price is low are probable not the tenants you are trying to attract. To increase your success as an investor, you will need to do all of the work required to find the perfect price point or higher the services of a great local property manager.

4. supply and demand will influence the correct rent

You will not just set a one-time price for your rental and then forget about it. You must constantly look at the market and adjust the rent based on supply and demand.

For example, when the economy is bad, the demand for rentals can go up because people can no longer afford their homes and are forced to rent instead. A bad economy can also cause a greater demand for smaller, cheaper apartments because people have to downsize. In the summer, the demand for larger apartments may be greater because families are trying to move before the school year starts.

The basic rule of thumb is, when there is greater demand for your particular unit, you can charge a higher rent. When there is less demand, you may have to lower the rent to attract tenants. This is all part of getting to know your market to increase cash flow and success. It takes time and devotion.

5. The correct Rent will lead to better cash flow

There are different strokes for different folks. Each investor is unique. Everyone has a different goal when owning investment property. Regardless of your desire, the right rent should, at a minimum, be enough to cover all your expenses for the property and put cash in your pocket. I like to see a minimum off $100 per door! The rent should cover your mortgage payment, property taxes, insurance, utilities, maintenance, repairs on the property, vacancy costs, and property management(even if you self manage because your time is worth money and one day you may want to free up your time and hire a property manager).

Disclaimer: The information provided in this post or any post is not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

I hope this information serves you well. I will provide more helpful, free, info soon!!!

P.S Please leave a comment below. Your feedback is important to us!

Jeff Woods,

Woods&mazzulla properties

www.wamproperties.com