How Much Rent Should I Charge in 2024?

Investing in a rental property allows you to earn income and build a long-lasting investment portfolio. However, having a successful rental property requires setting the right rental rate. You need to strike a balance between profitability and the current renter demand in the local market. By considering factors like the amenities you offer and the condition of the property, you can set a rental rate that earns you money while also being competitive in the surrounding market.

Why Landlords MUST Get This Right

This is among the most important aspects of owning a rental property. Rental rates are the main thing you must get right if you want to build cash flow and create a profitable portfolio. Not charging the right rent can lead to significant long-term losses in potential profit. 

If the rent is too low, you could attract the wrong type of tenant for your property. However, a high rental rate that most tenants can't afford will likely result in lengthy vacancies that cause you to lose money. To identify the perfect rental rate for your property, keep reading! 

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What Influences Your Rental Rate?

You can choose a good rental rate for your property by understanding the main factors that influence it. Consider everything from the type of property to the amenities you offer to select a rate that will appeal to prospective tenants. The ideal rental rate is the one that high-quality tenants are willing to pay.

Property Location

The location of your property is a significant factor in determining what rent you should charge. If your house or apartment building is in a desirable location that's close to numerous shopping destinations, restaurants, and schools, you could charge a higher rent. When the property is in an area that's not close to much of anything, you may need to set a lower price to appeal to potential tenants.

Property Condition

People expect the condition of the property they live in to match the rent they're paying. If the average rent in your area is $1,200, you can't charge $2,000 per month when your property requires major repairs. Consider the condition of the property and which repairs are needed before you set a final price.

Property Type

You must also consider the type of property you're investing in. A single-family home with three bedrooms and two bathrooms will often rent for more than an apartment of the same size. 

Amenities

Amenities will have a strong influence on the rent you can charge. Does the property you're investing in have:

• Air conditioning
• Multiple bathrooms
• A pool
• Walkability to shops, restaurants, or highly-ranked schools
• Nearby public transportation 

If you're able to offer all these amenities, you can set a higher price. 

Tenant Income

Consider the average tenant income as well. If you own a building in a major city, tenants should be able to afford more because they bring in higher incomes. For example, renters in San Francisco can pay $5,000 per month for a studio apartment because they may make $300,000 per year!

How Much to Charge for Rent

You can determine how much you should charge for rent by taking the following steps. By looking at the competition and calculating your full rental numbers, you should be able to arrive at the right price. 

1. Look at the Competition

Before you do anything else, look at the competition. Go to Zillow, Realtor, or Apartments.com to perform this search. You can search for the exact criteria that fit your rental, which include the following:

• Same bathroom/bedroom count
• Same amenities
• Similar square footage, within 200 sq. ft.
• Same location and neighborhood

2. Use Free Rent Estimators

You can get some help in setting your rental price by using free online estimators. Some great online rent estimators are BiggerPockets Rent Estimator and Rentometer. When using the BiggerPockets tool, just enter your address. The Rentometer tool allows you to enter the building type as well as the total number of bedrooms and bathrooms, which should result in a more accurate estimate.

3. Ask Property Managers

Whether you have one or not, you can call local property managers and ask what they think the rent should be. This step should take just a few minutes of your time. If you can get in touch with a local property manager, they could provide valuable information that will make it easier for you to properly price your building.

4. Calculate Your Full Rental Numbers

This step is CRUCIAL to ensure you're not losing money once you start renting out your property. If you don't make these calculations, you could sink a large sum of money into a property that will never be profitable. These calculations allow you to set a price that's higher than your monthly expenses. 

Try our free Rental Property Calculator, which you can use to calculate cash flow, ROI percentages, cash-on-cash return, and more! Just enter a property's purchase price, down payment, expenses, and interest rate. Once you submit this information, you'll instantly get a full analysis of the property.

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Should You Use the 1% rule?

The 1% rule is a rental property rule of thumb that states you should charge 1% of the home's value in rent every month. For example, if you buy a $250,000 home, you need to charge $2,500 in monthly rent. 

This strategy MAY work in some expensive markets. For the most part, however, this rule will NOT work and is quite outdated. In most real estate markets, home appreciation has outpaced rents significantly, so this will NOT work. Use the other strategies in this guide to find the right rental price. 

4 Tips to Get Higher Rents

No matter the type or condition of the property you're investing in, there are certain strategies you can implement to get higher rents. You don't need to make major upgrades to the property to justify charging a higher price.

1. Make These Inexpensive Upgrades

A simple but effective way to get higher rents is by making inexpensive upgrades that boost your property's value. Some affordable upgrades can help your home look brand new, which should warrant a higher rental rate. These improvements include the following:

• Sprucing up landscaping and laying down mulch
• Replacing doorknobs, faucets, and light fixtures
• Repainting the interior/exterior of your property
• Replacing carpet with luxury vinyl plank (LVP)
• Adding an affordable backsplash to your kitchen
• Power-washing the exterior of your home
• Investing in a home security system

2. Hire Professional Property Management

Whether you're thinking of investing in a single-family home or multi-family apartment building, it's a good idea to hire professional property management. Property managers can help accurately comp your home so you get the best rent possible. They'll look at similar properties in the area to make sure you're charging a rate that potential tenants will pay. 

3. Use a Listing Aggregator

Some property management software like Avail, AppFolio, and TurboTenant can post your listing to dozens of rental websites, helping you get the biggest renter pool possible. Even if your rental property is in a location that's not highly desirable, you can get qualified tenants interested in your building by making sure it's listed on as many websites as possible, which should make it easier for you to charge a higher rent.

4. Get Professional Photos

Sometimes, you don't need to change anything about your property. But getting high-definition, wide-angle photos (NOT photos taken on your phone) can make your property shine on a listing website, which can result in higher rents. 

Before you hire a photographer, look around for the right one. Obtain several quotes before making your final decision. You should also ask for samples of the photographer's previous work to ensure they know how to effectively display a property.

Get Your Best Rent!

Use the suggestions and tips in this guide to identify the perfect rent price for your property. Your goal should be to maintain positive cash flow, which means bringing in more money than you spend every month. 

If you're looking for high-ROI turnkey rentals with instant cash flow, Rent to Retirement has what you need! We offer a wide range of properties from many different areas around the country that you can feel confident about investing in. 

How Much Should I Charge for Rent FAQs

How Should You Calculate Rent?

You can effectively determine the amount of rent you should charge by studying the competition, asking fellow landlords about their rental rates, and performing some simple calculations. Use Rent to Retirement's Rental Property Calculator to calculate everything from cash-on-cash return to ROI percentages. By performing these calculations, you'll be able to set a rent price that allows you to make money on your property.

How Much More than My Mortgage Should I Charge in Rent?

You should always charge more in rent than you pay for your mortgage each month. However, the exact amount varies based on taxes, insurance, repair costs, and HOA fees. It's a good idea to charge at least 25% higher than what you pay every month. But, you must make sure potential tenants are willing to pay this price. 

Is the 1% Rule in Real Estate Realistic?

In real estate investing, a property can only meet the 1% rule if its monthly rent is equal to 1% or more of the purchase price. If you buy a single-family home for $200,000, you need to charge at least $2,000 per month to meet this rule. However, property values have skyrocketed, which means that the 1% rule isn't as realistic as it once was. When you're trying to determine if an investment is worth the price, use the cap rate calculation instead. You can calculate cap rate here!