Rental rates affect both tenants and landlords, which is why it’s important to choose your rate carefully. Overcharging for rent could leave you with a vacant property that is difficult to rent out, while undercharging could stick you with extra expenses despite having paying tenants. Correctly determining how much you should charge for rent will help you avoid these problems.
Rental Rates are Unique to Each Property
There is no one-size-fits-all way to determine what to charge for rent because every property is unique. Location, size, amenities, and current rental market trends are all things that must be taken into consideration when trying to set a rental rate.
Even though, as a landlord, you have the ability to charge whatever you want for rent, it is important to make sure your rental fees are fair yet competitive within the current market. Asking a fair rate will not only get your property rented quickly, but it will also help cover expenses such as property taxes, mortgages, repairs, and HOA fees.
Given how rental rates vary from property to property, it is no surprise the most common question landlords ask is “what should I charge for rent?”. The following advice can help you determine what to charge, and while this advice is specific to the Seattle area, landlords all around the country could find it useful.
Determine Fair Market Rate for Your Property
When determining what to charge for rent, start by assessing what the fair market rate is for your property. The U.S. Department of Housing and Urban Development, or HUD, has a great tool available to landlords to help them determine fair market rates for their property. Just input the size of the property, and the HUD calculator will show you what the fair market rate is for your area.
However, while the HUD calculator is a great place to start, it only offers general guidance and does not take into account other factors such as neighborhoods or property amenities that can increase the property value.
The 1% Rule for Rental Rates Might Not be Able to be Used for Seattle Properties
In the past, landlords were advised to ask for a rental rate that was approximately 1% of the mortgage rate or property value. Unfortunately, this is no longer a realistic expectation as inflation has caused housing prices to increase dramatically.
In some areas of Seattle, smaller homes have an extremely high value, and charging 1% of the mortgage rate for rent isn’t realistic in these cases. While you could ask for that much, you may have difficulty finding tenants.
Do Your Research to Determine Rental Rates for Your Area
The best way to determine fair rental rates for a property is to do your research. Websites, such as Zillow, Craigslist, and Trulia can help you see what other local competitors are asking for rent.
When looking at competitor rental rates, make sure you are looking at comparable properties. You probably won’t find a property that is exactly like yours, however, you can find something that is in the same area or that offers similar amenities. By comparing rates of similar properties, you can get a realistic idea of what to charge for rent.
Keep Your Monthly Mortgage Payment and Other Expenses in Mind When Determining Rental Rates
It is important to charge a rental rate that covers your monthly mortgage payment. However, there are other expenses you will encounter as a landlord that you will want to make sure are also covered.
Make sure you consider the following when determining rental rates for a property:
- Monthly mortgage
- Property tax
- HOA fees
- Routine maintenance such as yard work or general care for property amenities
By considering both your expenses and local competitor rates, you can get a general idea of the minimum rental rate you should charge for a property in the Seattle area.
Powell Property Management can Take the Stress Out of Being a Landlord
Landlords can benefit by using the property management services provided by Powell Property Management. Our staff has experience in determining fair rental prices based on location, amenities, market trends, and property size. Landlords who use our rental management services can rest easy knowing that their rental property is not only covering expenses but helping them to make a profit.
Powell Property Management services can help to determine rental rates, as well as helping with other aspects of rental property ownership, such as finding and screening tenants, handling on-site property issues, collecting rent, and making sure all local housing laws are being followed.
Contact us today to learn how Powell Property Management can help you with your residential or commercial rental property in the Seattle area.