The key to running a successful rental investment starts with its rental value. As a landlord, your goal should be to set a rental rate that not only maximizes your income but also ensures your property remains competitive.
But this task might not be as easy as it sounds. You may end up overcharging your tenants, leaving you with frequent vacancies. Whereas undercharging your tenants could leave you with difficulty paying for maintenance, a mortgage, or other fees.
In today’s guide, we at MN Property Nerds will walk you through everything you need to know so you can set the best price for your Minneapolis rental property.
Here are some great reasons why you need to set a fair and competitive price for your rental property:
Once you set the right rental rate, you should have a much better chance of landing the right tenant and making a profit from your investment. But as a landlord, you’ll need to consider an array of factors when deciding on your rental rates. Some of these key factors are as follows:
According to a national rent index by Apartment List, rents continue to increase annually in most markets. This is good news for landlords, as you could increase your rent price every year.
That said, it’s always important to understand the local market in which you operate. Basically, learn what other landlords are charging for comparative rental properties. Once you have an idea of what your competition charges, make the necessary adjustments based on the unique qualities your property has.
Once you have an estimate, the next thing is to factor in any unique features your property may have. For example:
As a landlord, you have probably heard about the 2 percent rule. According to the rule, the monthly rent should be anywhere between 1-and-2 percent of the value of the property.
For instance, suppose that you bought your Minneapolis rental property at a cost of $200,000. Then according to the 2 percent rule, it means that the monthly rent amount should fall anywhere between $2,000 and $4,000.
But, keep in mind that this is just an estimate. As such, it shouldn’t be a substitute for doing research and due diligence. What’s more, property prices have recently risen faster than rents can keep up, so the 2 percent rule could prove faulty.
Different seasons will impact your rental price. Generally speaking, demand for rentals tends to go up during the summer and spring seasons and plummets during the cold winter months.
With this in mind, you may want to lower your rental price during the off-peak season to avoid having a vacancy.
Just like the changes in season impacts rental price, so does market demand. So part of being a great landlord is understanding that setting a rental price isn’t a one-time event. You must constantly adjust it to meet the market demands.
For instance, when the economy plummets, it may mean that fewer people would afford to buy homes. Consequently, the rental demand could skyrocket. A bad economy, on the other hand, would mean cheaper apartments because people may want to downsize.
There you have it – 5 tips on how to price your Minneapolis rental property. The general rule of thumb, though, is the greater the demand for your particular unit, the more rent you can charge.
If you need expert help, MN Property Nerds can help. We are an honest and reliable property management company that has been serving Twin Cities and the surrounding areas since 2007.