If you want to boost the occupancy rate of your rental property, setting a competitive yet profitable rent is a must. In order to achieve this goal, landlords need to consider several critical components, including monthly expenses on the rental, potential return on investment, and the changing market scenario.
The amount you should charge for rent also varies according to the location of your house, amenities you offer, seasonal trends, and the tenants’ demand. Here is a step-by-step guide that can help you determine how much you should charge for rent in Philadelphia.
Analyze the Rental Market Trends
Landlords need to do market research to understand the current market value of their property and the competition in the local housing market. You cannot make your rental stand out from the rest if you do not know what your tenants can afford, how you can attract them, and which price is consistent in the market. You should also evaluate the rent that your neighbors are charging and their considerations for setting the amount.
Landlords should also study the global real estate market, urbanization patterns, demographic changes, and the local market.
Consider the Amenities You Are Providing
If you are providing ample amenities, you can charge reasonably high rent. However, asking for high rent without providing additional services will reduce your opportunities for finding a good tenant. Amenities such as adequate car parking, smart safety and security devices, outdoor seating for single-family homes, and internet services are commonly preferred by tenants in Philadelphia.
To convince potential renters that your rent is justified, you can highlight the unique features and amenities in your listings and show that the rent is worth it. Fancy offerings such as a swimming pool, lobby, gaming zone, or a fitness studio attract high-standard tenants who can be willing to pay higher rent for your unit.
Study Your Local Competition
Analyzing local competition can help you in determining whether your rent fits in your neighborhood’s average rent bracket. Figure out the rent-to-amenities ratio, i.e., the rent your neighbors charge for their units as compared to the space and the amenities they provide.
Observe the key features of other rentals, such as proximity to transportation, interior, landscaping/exterior, and pet policies. Check their listings for the rent amount or enquire about it in person. After thoroughly studying rental trends in your neighborhood, you can fix a price point for your own property based on the amenities you offer and the services you are willing to provide.
Take Rent Control Laws In Account
Landlords should consider the Rent Control Laws in the US while fixing the rent for their unit. These laws vary from state to state. In Philadelphia, there is no cap on how much rent a landlord can charge. Theoretically, landlords can charge high rents if they wish to, and no law will stop them from doing so. However, The Emergency Housing Protection Act in Philadelphia protects financially distressed tenants from eviction for nonpayment and excessively high rent.
Follow the 1% Rule for Charging Rent
As a benchmark, landlords can use the 1% rule while deciding the monthly rent for their properties. It means the monthly rent of your property should be 1% of the total market value of your rental, i.e., between 0.8% to 1.1%. For example, if the value of your property is below $375,000, you can decide close to 0.8%, and if it exceeds $375,000, you can charge somewhere around 1.1% of the total property valuation.
Estimate Your Profit Margin
Renting a house isn’t just about collecting rent, but also about spending money to keep the property rentable. Many landlords manage their mortgages, repair and maintenance charges of the rental house, taxes on rental income, insurance, and other costs solely through the rental income. It is, therefore, essential to ensure that you earn a substantial profit even after all expenses are covered.
For example, you must consider the cost of storm shutters or burst pipes in winter and stormy weather. On the other hand, you may have to spend money on HVAC repairs during the summer. Charge rents that will allow you to earn a decent profit even after spending on rental maintenance requirements.
Considering all the above components while going through the rental valuation process can be highly beneficial. A Philadelphia property management company can guide you even better while figuring out how much you should rent the property.
At TCS Management, we assist you in setting a reasonable rent for your Philadelphia rental that can attract potential tenants and give you a steady cash flow. For more details, contact us at TCS Management.