Pricing Your Minneapolis Home to Rent

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.

Why Should You Set A Competitive Rate?

Here are some great reasons why you need to set a fair and competitive price for your rental property:

• According to a study from the credit specialists at TransUnion, it was found that rent issues were a concern for a majority of landlords. Unsurprisingly so as evicting a tenant can not only be time-consuming, but also expensive.
• Not charging the right rent can make you attract the wrong tenants. If you charge a low price, you may fail to attract your ideal tenant. But if you charge high rates, you may have a problem finding a tenant at all.
• Charging the right rent will help you cover your operational costs. Your Minneapolis rental property is an investment. If the monthly rent you charge tenants doesn’t help cover all operational costs, then the rent is probably underpriced.
• By charging the right rent you will maximize your rental income. According to The Balance, it may be possible for landlords to increase their rental income by up to 6% if they correctly set it.

A Guide to Setting the Right Price

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:

Get to Know the Competition

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.

Adjust for Your Amenities

Once you have an estimate, the next thing is to factor in any unique features your property may have. For example:  

• View: Homes that have a beachfront will be more desirable than those with a parking lot view and so you can charge a greater rate.
• Furnishings: If you are renting out a furnished property you will need to adjust your pricing for that.
• Updates: Have you recently updated your rental property with new hardwood floors, appliances, or other amenities? If you have, your rental price should reflect that, as it’ll be more desirable.
• Square Footage: The bigger the square footage, the more desirable the property will be and so your price should reflect this.
• Parking: Offering a dedicated parking space for your tenants could be a huge bonus for them.
• Pet Policy: If you offer a pet policy, make sure to have this reflected in your rental value and lease.
• Security: This is always a perk, as a tenant will have peace of mind knowing their home is safe and secure should you over specific security services like a concierge.

Be Flexible

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.

Understand the Seasonality of Your Investment

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.

Learn How the Market Changes

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.

Bottom Line

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.