So, you have a rental property but you’re not sure how much it should rent for? Well, you can use a paid service or you can use my trick.
I research rental rates in my area using Hotpads.com. Why Hotpads.com instead of Zillow.com, Realtor.com or Apartments.com you ask. They all have pictures of the unit, address, income requirements, deposit requirements, and rental amount.
Well, Hotpads.com has something valuable that other sites don’t, a section called “competition for this rental”. The competition for this rental section provides two pieces of information that is useful to tenants and landlord/property managers alike. One section displays the number of times a rental listing has been viewed, and the other section contains the number of times the landlord/property manager has been contacted about the rental listing.
You can use that information combined with pictures of the unit, address, income requirements, deposit requirements, and rental amount to gauge the market interest.
Let’s go over an example of how I do this.
So, let’s say you have a 700 sq ft two bedroom single family home with one bathroom, a basement, garage, updated kitchen, and updated bathroom. You open hotpads.com and search for similar listings in the area of your property and you find three houses that are similar in size.
The first house is listed for $1000 a month and also has one bathroom, a basement and garage. When reviewing the pictures, you notice that the kitchen and bathroom are updated, and the house seems to be in good order. Upon review the “competition for this rental” section you see that the listing has been viewed 90 times and the listing agent has been contacted twice in the past week.
The second house is listed for $925 per month also has one bathroom, a basement and garage. The home appears to be in good order however the kitchen and bathroom has not been updated in 10 years. However, when reviewing the “competition for this rental” section you see that the listing has been viewed 75 times and the listing agent has been contacted 40 times in the past week.
The third house is listed for $865 per month and also has one bathroom, a basement, but no garage. The house is fair condition and reviewing the “competition for this rental” section you see that the listing has been viewed 65 times and the listing agent has been contacted 10 times in the past week.
So how much rent should you charge for your property?
Well let’s look at what the market is telling us. Clearly the demand for the first house for $1000 a month is very low. Yes, they have received a lot of page views (mainly due to the pictures of the property) but the amount of people who have inquired about the property is low. Which leads me to conclude that there is another factor at play, for example location, school district, or tenants that search in the area of the property just do not make enough to comfortably afford the rent.
As for the third house, the condition is fair, and it doesn’t offer a garage and although it’s not a true apples to apples comparison with your property it does give us an idea of the minimum amount of rent we could expect for your property.
Now as for the second house, there is a good number of views for that listing and more importantly that landlord received a lot of inquiries. This tells us that the price point for the second listing is reasonable if not low for the area and condition of the house and since our property has an updated kitchen and bathroom, we can charge a premium for that. Given the information we have, in my opinion I would list your property for $950 per month.
Charging $50 a month less than the first house may not seem like a lot of money, but from a tenant’s perspective it’s huge. You will also have the benefit of drawing serious interest and consideration of the prospective tenants of the second house since your listing is only $25 more per month. That’s not much to ask for when we are talking about an updated look (which the tenant can’t change nor will their landlord).